Market tightness explained

Market tightness is a measure of the liquidity of a market.^[1] High market tightness indicates relatively low liquidity and high transaction costs, whereas low market tightness indicates high liquidity and low transaction costs.^[2] For example, during the dotcom bubble, information technology companies were very difficult and expensive to buy a part of, through stock, loan, or other methods, due to the tightness of competition in the market.

Equity markets

In equity markets, market tightness is measured using percentage relative spread.^[3]

Housing markets

In housing markets, measures of market tightness include the probability of achieving a sale and house price appreciation. Tighter housing markets result in greater seller bargaining power and higher sale prices.^[4]

Labour markets

Labour market tightness is measured as the ratio of job vacancies per unemployed person or jobseeker.^[5]

Notes and References

1. Web site: market tightness . . 17 July 2017 . 30 May 2021.
2. Depth, tightness and resiliency as market liquidity dimensions: evidence from the Polish stock market . J. . Olbrys . M. . Mursztyn . 2019 . International Journal of Computational Economics and Econometrics . 9 . 4 . 308–326. 10.1504/IJCEE.2019.102513 .
3. Book: Olbrys, J. . https://link.springer.com/chapter/10.1007/978-3-030-38253-7_36 . 2020 . Market Tightness on the CEE Emerging Stock Exchanges in the Context of the Non-trading Problem. Advances in Cross-Section Data Methods in Applied Economic Research. Springer Proceedings in Business and Economics . 553–569 . . 10.1007/978-3-030-38253-7_36. 978-3-030-38252-0 . 212801466 .
4. Can tightness in the housing market help predict subsequent home price appreciation? Evidence from the United States and the Netherlands . Carrillo . P.E. . de Wit . E.R. . Larson . W. . 2015 . Real Estate Economics . 43 . 3 . 609–651. 10.1111/1540-6229.12082 . 155561559 .
5. Life satisfaction of employees, labour market tightness and matching efficiency . de Pedraza . P. . Guzi . M. . Tijdens . K. . 2020 . International Journal of Manpower.