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Measuring Liquidity in the Greek Government Securities Market

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  • Thanasis N. Christodoulopoulos

    ()
    (Bank of Greece, Financial Operations Department)

  • Ioulia Grigoratou

    (Bank of Greece, Financial Operations Department)

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    Abstract

    Liquidity 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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    File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper200523.pdf
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    Bibliographic Info

    Paper provided by Bank of Greece in its series Working Papers with number 23.

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    Length: 52 pages
    Date of creation: May 2005
    Date of revision:
    Handle: RePEc:bog:wpaper:23

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    Web page: http://www.bankofgreece.gr
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    Related research

    Keywords: Money demand; Greek bond market; market microstructure; liquidity; order flow.;

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    1. Sanford J. Grossman & Merton H. Miller, 1989. "Liquidity and Market Structure," NBER Working Papers 2641, National Bureau of Economic Research, Inc.
    2. Amihud, Yakov & Mendelson, Haim, 1991. " Liquidity, Maturity, and the Yields on U.S. Treasury Securities," Journal of Finance, American Finance Association, vol. 46(4), pages 1411-25, September.
    3. Harris, Lawrence, 1987. "Transaction Data Tests of the Mixture of Distributions Hypothesis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(02), pages 127-141, June.
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    14. Duffie, Darrell, 1996. " Special Repo Rates," Journal of Finance, American Finance Association, vol. 51(2), pages 493-526, June.
    15. Chris D'Souza & Charles Gaa & Jing Yang, 2003. "An Empirical Analysis of Liquidity and Order Flow in the Brokered Interdealer Market for Government of Canada Bonds," Working Papers 03-28, Bank of Canada.
    16. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
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    18. Chris Downing & Frank Zhang, 2004. "Trading Activity and Price Volatility in the Municipal Bond Market," Journal of Finance, American Finance Association, vol. 59(2), pages 899-931, 04.
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    Cited by:
    1. George A. Christodoulakis & Stephen E Satchell, 2006. "Exact Elliptical Distributions for Models of Conditionally Random Financial Volatility," Working Papers 32, Bank of Greece.
    2. Hans Genberg, 2006. "Exchange-Rate Arrangements and Financial Integration in East Asia: On a Collision Course?," Working Papers 41, Bank of Greece.
    3. Alexandros E. Milionis, 2006. "An Alternative Definition of Market Efficiency and some Comments on its Empirical Testing," Working Papers 50, Bank of Greece.
    4. Williamson, John, 2006. "A Worldwide System of Reference Rates," Working Papers 130, Oesterreichische Nationalbank (Austrian Central Bank).
    5. Otmar Issing, 2006. "Europe's Hard Fix: The Euro Area," Working Papers 39, Bank of Greece.
    6. George S. Tavlas & P.A.V.B. Swamy, 2006. "The New Keynesian Phillips Curve and Inflation Expectations: Re-Specification and Interpretation," Working Papers 34, Bank of Greece.
    7. Eleni Angelopoulou, 2005. "The Comparative Performance of Q-type and Dynamic Models of Firm Investment: Empirical Evidence from the UK," Working Papers 27, Bank of Greece.

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