Market tightness is a measure of the liquidity of a market. High market tightness indicates relatively low liquidity and high transaction costs, whereas low market tightness indicates high liquidity and low transaction costs.
For example, during the
dotcom bubble
The dot-com bubble (or dot-com boom) was a stock market bubble that ballooned during the late-1990s and peaked on Friday, March 10, 2000. This period of market growth coincided with the widespread adoption of the World Wide Web and the Intern ...
,
information technology
Information technology (IT) is a set of related fields within information and communications technology (ICT), that encompass computer systems, software, programming languages, data processing, data and information processing, and storage. Inf ...
companies were very difficult and expensive to buy a part of, through stock, loan, or other methods, due to the tightness of competition in the market.
Equity markets
In equity markets, market tightness is measured using
percentage relative spread.
Housing markets
In housing markets, measures of market tightness include the probability of achieving a sale and house price appreciation. Tighter housing markets result in greater seller bargaining power and higher sale prices.
Labour markets
Labour market tightness is measured as the ratio of job vacancies per
unemployed
Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is the proportion of people above a specified age (usually 15) not being in paid employment or self-employment but currently available for Work (hu ...
person or jobseeker.
References
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Market structure