Not often that I post a part 2 of a video - but here in part 2 there was a really interesting opinion from Francis Bonnin.
The greater the liquidity of an asset the greater the amount of information that is embedded in the price.
To me this is both logical and really interesting. There are a couple of strands to it.
- What kind of information is in the price. Is it the right information, can it be relied on.
- With a value investor hat on - should you avoid the information that is in the price, is it the kind of information that you should be interested in?
Basically both points are the same thing - are liquid stocks more likely to be priced correctly. It is also a close relation to the observation that you are less likely to find miss pricing in well researched stocks. You can well imagine that well researched stocks are less liquid.
Anyhow here is Francois Bonnin's interview. YouTube will serve up part 1 as well if you look for it.
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