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What are thinly traded securities?


Jeff
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Thinly traded securities are those whose prices are unstable such that one cannot easily sell or exchange them for cash without causing significant fluctuations in their prices.  

 

These securities have significantly higher liquidity risk. Because of price volatility, thinly traded securities are mostly exchanged in low volumes with very little to no liquidity. 

 

The other characteristic of thinly traded securities is the fact that they exist outside the national stock exchanges.

 

Thinly traded securities are also always associated with companies listed on over-the-counter exchanges and so they lack ready buyers and sellers leading to the other challenge of a significantly large gap between the asking price and the bidding prices.

Furthermore, price volatility makes thinly traded securities riskier compared to liquid assets.

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