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Estimating liquidity premia in the Spanish Government securities market

In: Market liquidity: proceedings of a workshop held at the BIS

Author

Listed:
  • Francisco Alonso

    (Banco de España)

  • Roberto Blanco

    (Banco de España)

  • Ana del Río

    (Banco de España)

  • Alicia Sanchís

    (Banco de España)

Abstract

This paper investigates the presence of liquidity premia in the relative pricing of assets traded on the Spanish government securities market. First, a classification of bonds into four different categories based on their degree of liquidity is proposed. Second, liquidity premia are estimated introducing liquidity parameters in the estimation of the zero-coupon yield curve. Results suggest the existence of a liquidity premium for post-benchmark bonds (both strippable and non-strippable). The size of this premium is relatively small. In the case of pre-benchmark bonds, the lack of liquidity does not seem to be priced. It is also shown that these pricing discrepancies are robust to the impact of taxes on bonds.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Francisco Alonso & Roberto Blanco & Ana del Río & Alicia Sanchís, 2001. "Estimating liquidity premia in the Spanish Government securities market," BIS Papers chapters, in: Bank for International Settlements (ed.), Market liquidity: proceedings of a workshop held at the BIS, volume 2, pages 79-112, Bank for International Settlements.
    • Handle: RePEc:bis:bisbpc:02-04
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    References listed on IDEAS

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    Cited by:

    1. William Lin & Shih-Chuan Tsai & David Sun, 2011. "Price informativeness and predictability: how liquidity can help," Applied Economics, Taylor & Francis Journals, vol. 43(17), pages 2199-2217.
    2. William T. Lin & David S. Sun, 2007. "Liquidity-Adjusted Benchmark Yield Curves: A Look at Trading Concentration and Information," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 10(04), pages 491-518.
    3. Simona Delle Chiaie & Bernardo Maggi, 2014. "Italian Government debt liquidity, is it of value?," DSS Empirical Economics and Econometrics Working Papers Series 2014/3, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome.
    4. Caio Ibsen Rodrigues De Almeida & Antonio Marcos Duarte & Cristiano Augusto Coelho Fernandes, 2003. "A Generalization Of Principal Component Analysis For Non-Observable Term Structures In Emerging Markets," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 6(08), pages 885-903.
    5. Diaz, Antonio & Merrick, John Jr. & Navarro, Eliseo, 2006. "Spanish Treasury bond market liquidity and volatility pre- and post-European Monetary Union," Journal of Banking & Finance, Elsevier, vol. 30(4), pages 1309-1332, April.
    6. 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, Department of Economics.
    7. Emma Berenguer & Ricardo Gimeno & Juan M. Nave, 2013. "Term structure estimation, liquidity-induced heteroskedasticity and the price of liquidity risk," Working Papers 1308, Banco de España.

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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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