Thin Market
A thin market has low liquidity and sparse trading. Prices can be stale or moved by small trades, making consensus estimates less reliable.
Definition
A thin market is a market with low liquidity and limited trading activity.
Why it matters
Thin markets produce noisy prices. Last traded price can be stale, and even mid price can jump around. If you use market prices as benchmarks, thin markets increase variance and make evaluation less stable.
Practical guidance
• Prefer mid price or VWAP to last trade when possible.
• Use wider time windows for consensus estimates.
• Report liquidity context in scorecards when benchmarking against markets.
Related
Thin markets are vulnerable to price noise and perceived manipulation, which can affect the quality of market consensus.