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Noise as a liquidity measure: Evidence from the JGB market

Takahiro Hattori

Pacific-Basin Finance Journal, 2021, vol. 67, issue C

Abstract: This paper analyzes the liquidity of the fixed-income market in Japan based on the noise measure proposed by Hu, Pan, and Wang (2013). We show this measure can capture the illiquidity in the Japanese market, especially during the liquidity crisis of 2008–2009. We also demonstrate that this measure can track the commonality of liquidity in the international capital market, especially after the financial crisis. Moreover, we show that this measure can track the degree of the limits to the arbitrage in the light of the risk aversion.

Keywords: Liquidity; Commonality of liquidity; Bank of Japan; JGB; Limits to arbitrage (search for similar items in EconPapers)
JEL-codes: E43 G18 G28 H12 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:67:y:2021:i:c:s0927538x21000226

DOI: 10.1016/j.pacfin.2021.101515

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