Comparing possible proxies of corporate bond liquidity

Patrick Houweling, A.A. Mentink and Ton Vorst ()

No EI 2003-49, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: We consider eight different proxies (issued amount, coupon, listed, age, missing prices, yield volatility, number of contributors and yield dispersion) to measure corporate bond liquidity and use a five-variable model to control for interest rate risk, credit risk, maturity, rating and currency differences between bonds. The null hypothesis that liquidity risk is not priced in our data set of euro corporate bonds is rejected for seven out of eight liquidity proxies. We find significant liquidity premia, ranging from 9 to 24 basis points. A comparison test between liquidity proxies shows limited differences between the proxies.

Keywords: Fama-French model; corporate bonds; euro market; liquidity (search for similar items in EconPapers)
JEL-codes: C13 G12 (search for similar items in EconPapers)
Date: 2003-08-07
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Citations: View citations in EconPapers (5)

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Journal Article: Comparing possible proxies of corporate bond liquidity (2005)
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