In finance, liquidity is a concept with many interpretations, and many uses. Following the recent financial crisis there has been a huge increase in research on liquidity related topics both with respect to macro liquidity, funding liquidity, the liquidity of different asset classes and markets as well as the flow of funds between different assets and markets.

In this paper we look at the link between equity market liquidity and the real economy. In the discussion of the current financial crisis, much attention has been on the apparent casual effect from a dry up in the liquidity of financial assets to the crisis of the economy. Nes et al. [2009b] show that such links between aggregate stock market liquidity and the macro economy are not new, rather, they have been a stable feature of the US stock market at least since the Second World War. They show, using data for the US from 1947 through 2008, that equity market liquidity is a very good leading indicator of the real economy. We look at similar issues using data from the Norwegian equity market (Oslo Stock Exchange – OSE). We examine the liquidity of the Norwegian equity market represented by the stocks listed on the OSE over the period 1980 through 2008.