Share Turnover

Liquidity measures how easily something gets bought or sold. If you have an asset that's illiquid, you could get stuck with it. Even if you want to sell it, you might have trouble finding a buyer.

Take your 1998 Chevy Malibu, where the passenger door has been replaced by a plank of wood. You might really want to sell it. Unfortunately, no one wants to buy.

Meanwhile, having a very liquid asset means you can turn it into cash pretty much whenever you want. You aren't worried that you'll get trapped holding 100 shares of Apple stock; you can turn those into cash any time you want.

Share turnover provides a quantitative way of measuring the liquidity of a stock. To calculate the figure, take the total shares traded during a given period of time (like a trading session) and divide that by the number of shares outstanding. If you're looking at a longer time period, you would need to use the average number of shares outstanding, since that number can move around a little.

A low share turnover suggests an illiquid stock. People who have that stock tend to hold onto it. Not much of an active market. Transversely, a high share turnover suggests high liquidity, i.e. people are moving in and out of the stock all the time.