What improves when more participants are engaged in trading a security?

Question

Quizplus · Accepted Answer

Liquidity risk improves when more participants are engaged in trading a security. Liquidity risk represents the ease with which a security can be sold at a fair price without risk of loss. Securities can be marketable but not necessarily liquid. The primary measure of liquidity is the size of the spread between the bid and ask. A larger spread signals an illiquid market. Investors want liquid markets so as to sell their securities quickly at a fair price.

What Improves When More Participants Are Engaged in Trading a Security