Investor appetite for trading on London's Alternative Investment Market is apparently on the rise. The average daily amount of shares traded per AIM company rose by 50% last year. In numbers terms, an average £156,000 worth of stock per company changed hands daily during 2014. That compares to £107,000 in 2013 and just £95,000 back in 2009.

Howard MarksBut while the uptick is welcome, it's still the case that healthy levels of trading volume on AIM are confined to a relatively small number of popular shares. In a market that's notorious for a dearth of trading and wide spreads, liquidity remains patchy at best. With that in mind, there was an excellent memo this week from Oaktree Capital fund manager Howard Marks. He picked up on the issue of liquidity generally - what it means, why it's misinterpreted and how investors should deal with it. His general view is that liquidity has the greatest effect on those investors that rely on it most:

“…the worst defenses against illiquidity - or, better said, the approaches that make you most dependent on the availability of liquidity - are (a) employing trading strategies under which you buy things because of how you think they'll perform in the short run, not what they'll be worth in the long run, (b) being focused on what the market says your assets are worth, not what your analysis shows them to be worth, and (c) buying with leverage that exposes you to the risk of a margin call in a declining market."

At Stockopedia this week, we looked at how screening the market for the biggest 'earnings surprises' can be a way of finding momentum winners. Earnings season continues to keep our small-cap expert Paul Scott busy - you can read his reports here. Elsewhere, we also reviewed some of the research into the low-volatility anomaly for Interactive Investor in Protecting your portfolio from market volatility.

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