Estimating liquidity premia in the Spanish government securities market

Francisco Alonso, Roberto Blanco, Ana Del Rio and Alicia Sanchis

The European Journal of Finance, 2004, vol. 10, issue 6, 453-474

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.

Keywords: liquidity premium; bid-ask spread; yield curve; benchmark (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (5)

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Related works:
Chapter: Estimating liquidity premia in the Spanish Government securities market (2001)
Working Paper: Estimating Liquidity Premia in the Spanish Government Securities Market (2000)
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DOI: 10.1080/1351847042000254202

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