Measuring Liquidity in the Greek Government Securities Market
AbstractLiquidity in government securities markets, despite their importance to both private and public agents, has received much attention in the literature only recently due to the fact that high-frequency data from trading in those markets were previously unavailable. This paper attempts to measure liquidity in the Electronic Secondary Market for Securities, where Greek government securities are traded, by estimating six different liquidity measures from high-frequency data. The most appropriate measures for this specific market are derived from the analysis and comparison of the obtained estimates. By any of the measures examined, the ten-year benchmark bond is the most liquid security. The bid-ask spread emerges as a good measure of liquidity for the pre euro area entry period, but looses part of its importance in the post euro area entry period of our sample. An interesting finding is that, in the Electronic Secondary Market for Securities, liquidity is only weakly related to price volatility, probably due to the specific structure of the government securities market in Greece. Therefore, trading activity is also found to be a good proxy of liquidity in this specific market.
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Bibliographic InfoPaper provided by Bank of Greece in its series Working Papers with number 23.
Length: 52 pages
Date of creation: May 2005
Date of revision:
Money demand; Greek bond market; market microstructure; liquidity; order flow.;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-CFN-2006-11-18 (Corporate Finance)
- NEP-MST-2006-11-18 (Market Microstructure)
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