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Measuring Liquidity in the Greek Government Securities Market

Author

Listed:
  • Thanasis N. Christodoulopoulos

    (Bank of Greece, Financial Operations Department)

  • Ioulia Grigoratou

    (Bank of Greece, Financial Operations Department)

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.

Suggested Citation

  • Thanasis N. Christodoulopoulos & Ioulia Grigoratou, 2005. "Measuring Liquidity in the Greek Government Securities Market," Working Papers 23, Bank of Greece.
    • Handle: RePEc:bog:wpaper:23
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    References listed on IDEAS

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    Cited by:

    1. Hans Genberg, 2006. "Exchange-rate arrangements and financial integration in East Asia: on a collision course?," International Economics and Economic Policy, Springer, vol. 3(3), pages 359-377, December.
    2. George A. Christodoulakis & Stephen E Satchell, 2006. "Exact Elliptical Distributions for Models of Conditionally Random Financial Volatility," Working Papers 32, Bank of Greece.
    3. John Williamson, 2006. "A worldwide system of reference rates," International Economics and Economic Policy, Springer, vol. 3(3), pages 341-352, December.
    4. Otmar Issing, 2006. "Europe's Hard Fix: The Euro Area," Working Papers 39, Bank of Greece.
    5. 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.
    6. P. Swamy & George Tavlas, 2007. "The New Keynesian Phillips Curve and Inflation Expectations: Re-Specification and Interpretation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(2), pages 293-306, May.
    7. Alexandros E. Milionis, 2006. "An Alternative Definition of Market Efficiency and some Comments on its Empirical Testing," Working Papers 50, Bank of Greece.

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    More about this item

    Keywords

    Money demand; Greek bond market; market microstructure; liquidity; order flow.;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General

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