Liquidity refers to the degree to which an asset or security can be quickly bought or sold in the market without significantly affecting its price. In other words, it is the ease with which an asset can be converted into cash without incurring a significant loss in value . Highly liquid assets, such as cash or largecap stocks, can be easily bought or sold in the market without significantly affecting their price. On the other hand, assets with low liquidity, such as real estate or small cap stocks, can be difficult to sell quickly without having to lower the price.
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