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Market Liquidity after the Financial Crisis

Author

Listed:
  • Adrian, Tobias
  • Fleming, Michael J
  • Shachar, Or
  • Vogt, Erik

Abstract

This paper examines market liquidity in the post-crisis era in light of concerns that regulatory changes might have reduced dealers' ability and willingness to make markets. We begin with a discussion of the broader trading environment, including an overview of regulations and their potential effects on dealer balance sheets and market making, but also considering additional drivers of market liquidity. We document a stagnation of dealer balance sheets after the financial crisis of 2007-09, which occurred concurrently with dealer balance sheet deleveraging. However, using high-frequency trade and quote data for U.S. Treasuries and corporate bonds, we find only limited evidence of a deterioration in market liquidity.

Suggested Citation

  • Adrian, Tobias & Fleming, Michael J & Shachar, Or & Vogt, Erik, 2017. "Market Liquidity after the Financial Crisis," CEPR Discussion Papers 12248, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12248
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    Cited by:

    1. Adrian, Tobias & Boyarchenko, Nina & Shachar, Or, 2017. "Dealer balance sheets and bond liquidity provision," Journal of Monetary Economics, Elsevier, vol. 89(C), pages 92-109.
    2. Adrian, Tobias & Fleming, Michael J. & Vogt, Erik, 2017. "An index of Treasury Market liquidity: 1991-2017," Staff Reports 827, Federal Reserve Bank of New York.
    3. Mike Anderson & René M. Stulz, 2017. "Is Post-Crisis Bond Liquidity Lower?," NBER Working Papers 23317, National Bureau of Economic Research, Inc.
    4. Jaewon Choi & Yesol Huh, 2017. "Customer Liquidity Provision : Implications for Corporate Bond Transaction Costs," Finance and Economics Discussion Series 2017-116, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    Keywords

    corporate bonds; liquidity; market making; regulation; Treasury securities;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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