One of the most important function of financial markets and especially stock exchanges is facilitating, accelerating and cost reduction in conversion of financial asset into cash and vice versa.
Turnover velocity is the ability to buy and sell considerable amount of securities, quickly and with very little price effect. This feature has been defined for the market as a whole (Such as WFE calculate for its members monthly and yearly) and for individual securities as well.
In this research liquidity index is defined as the ratio of the number of shares transacted and total number of issued shares. The relationship between stock liquidity index at time t and its 6 lags is tested among 242 Tehran Stock Exchange (TSE) listed companies during four years (2005 to 2008) in panel data. The stationarity of data is also approved by unit root test. The significant relation between stock liquidity at time t and 6 previous lags is approved, besides, significant relation between Amihud liquidity index and the ratio which be applied in this research is approved. But model's R Squared is not high enough to be a good model for forecasting.