How to measure Corporate Bond Liquidity?
AbstractWe consider eight different measures (issued amount, coupon, listed, age, missingprices, price volatility, number of contributors and yield dispersion) to approximate corporatebond liquidity and use a five-variable model to control for maturity, credit and currencydifferences between bonds. The null hypothesis that liquidity risk is not priced in our dataset of euro corporate bonds is rejected for seven out of eight liquidity measures. We findsignificant liquidity premia, ranging from 9 to 24 basis points. A comparison test betweenliquidity measures shows that some ways to measure liquidity are better than others.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 03-030/2.
Date of creation: 27 Mar 2003
Date of revision:
Contact details of provider:
Web page: http://www.tinbergen.nl
liquidity; corporate bonds; Fama-French model; euro market.;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-04-27 (All new papers)
- NEP-CFN-2003-04-27 (Corporate Finance)
- NEP-FIN-2003-04-27 (Finance)
- NEP-FMK-2003-04-27 (Financial Markets)
- NEP-RMG-2003-04-27 (Risk Management)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Mahanti, Sriketan & Nashikkar, Amrut & Subrahmanyam, Marti & Chacko, George & Mallik, Gaurav, 2008. "Latent liquidity: A new measure of liquidity, with an application to corporate bonds," Journal of Financial Economics, Elsevier, vol. 88(2), pages 272-298, May.
- Van Landschoot, Astrid, 2004. "Determinants of euro term structure of credit spreads," Working Paper Series 0397, European Central Bank.
- Zheng, Harry, 2006. "Interaction of credit and liquidity risks: Modelling and valuation," Journal of Banking & Finance, Elsevier, vol. 30(2), pages 391-407, February.
- Coluzzi, Chiara & Ginebri, Sergio & Turco, Manuel, 2008. "Measuring and Analyzing the Liquidity of the Italian Treasury Security Wholesale Secondary Market," Economics & Statistics Discussion Papers esdp08044, University of Molise, Dept. SEGeS.
- C. N. V. Krishnan & Peter H. Ritchken & James B. Thomson, 2003.
"On credit spread slopes and predicting bank risk,"
0314, Federal Reserve Bank of Cleveland.
- Kucuk, Ugur N., 2009. "Dynamic Sources of Sovereign Bond Market Liquidity," MPRA Paper 19677, University Library of Munich, Germany.
- Nikolaou, Kleopatra, 2009. "Liquidity (risk) concepts: definitions and interactions," Working Paper Series 1008, European Central Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antoine Maartens (+31 626 - 160 892)).
If references are entirely missing, you can add them using this form.