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.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 03-030/2.
Date of creation: 27 Mar 2003
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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; Trading Volume; Bond Interest Rates
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-IFN-2003-04-27 (International Finance)
- NEP-RMG-2003-04-27 (Risk Management)
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