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The liquidity of the Secondary Market for Debt Securities in Norway

Author Info

Listed author(s):
  • Rakkestad, Ketil

    (Norges Bank)

  • Skjeltorp, Johannes

    (Norges Bank)

  • Ødegaard, Bernt Arne

    ()

    (University of Stavanger)

Abstract

The main purpose of this project is to examine the liquidity and activity in the secondary market for Norwegian debt securities. The second objective is to determine whether the activity and data availability is sufficient to construct indicators that can be used to monitor the state of Norwegian bond market on a regular basis. To this end we examine a detailed data set provided to us by Oslo B{\o}rs Informasjon (OBI) containing the complete record of daily trading activity in all exchange listed fixed income securities in Norway over the period 1999-2011. Due to the low trading activity in corporate securities and the fact that a large part of trading in corporate debt is conducted off market (OTC), makes it challenging to produce reliable liquidity indicators. In particular, order based liquidity measures (such as the bid ask spread), that typically are superior measures of liquidity supply, are in most cases not possible to construct due to the lack of two sided quote observation. On the other hand, due to the reporting rules of all OTC trades to the Oslo Stock Exchange, trade based measures of liquidity (such as the Amihud ILR) are more informative.

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File URL: http://dl.dropbox.com/u/8078351/uis_wps_econ_fin/uis_wps_2012_12_rakkestad_skjeltorp_odegaard.pdf
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Paper provided by University of Stavanger in its series UiS Working Papers in Economics and Finance with number 2012/12.

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Length: 31 pages
Date of creation: 17 Jul 2012
Handle: RePEc:hhs:stavef:2012_012
Contact details of provider: Postal:
University of Stavanger, NO-4036 Stavanger, Norway

Web page: http://www.uis.no/research/economics_and_finance

More information through EDIRC

Keywords: Liquidity; Norwegian Bond Market;

Find related papers by JEL classification:

  • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

This paper has been announced in the following NEP Reports:

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  1. Lorán Chollete & Randi Næs & Johannes A. Skjeltorp, 2008. "The risk components of liquidity," Working Paper 2008/03, Norges Bank.
  2. Alessandro Beber & Michael W. Brandt & Kenneth A. Kavajecz, 2009. "Flight-to-Quality or Flight-to-Liquidity? Evidence from the Euro-Area Bond Market," Review of Financial Studies, Society for Financial Studies, vol. 22(3), pages 925-957, March.
  3. Thierry Foucault & Ohad Kadan & Eugene Kandel, 2013. "Liquidity Cycles and Make/Take Fees in Electronic Markets," Journal of Finance, American Finance Association, vol. 68(1), pages 299-341, 02.
  4. Randi Næs & Johannes A. Skjeltorp & Bernt Arne Ødegard, 2008. "Liquidity and the business cycle," Working Paper 2008/11, Norges Bank.
  5. Skjeltorp, Johannes A & Odegaard, Bernt Arne, 2010. "Why do firms pay for liquidity provision in limit order markets?," UiS Working Papers in Economics and Finance 2010/3, University of Stavanger.
  6. Randi Næs & Johannes A. Skjeltorp & Bernt Arne Ødegaard, 2008. "Liquidity at the Oslo Stock Exchange," Working Paper 2008/09, Norges Bank.
  7. Long Chen & David A. Lesmond & Jason Wei, 2007. "Corporate Yield Spreads and Bond Liquidity," Journal of Finance, American Finance Association, vol. 62(1), pages 119-149, 02.
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