Back from Beyond the Bid–Ask Spread: Estimating Liquidity in International Markets

Liquidity and stock returns: Evidence from international markets

Available online 30 April 2015 This paper tests the relation between expected excess stock returns and illiquidity risk in G7 markets. By conducting panel regressions on monthly data for 20 years, evidence shows that excess stock returns of the G7 countries are positively correlated with market illiquidity risk, but are negatively correlated with the innovation of firm-level illiquidity. Applyi...

Liquidity Spillover in International Stock Markets through Distinct Time Scales

This paper identifies liquidity spillovers through different time scales based on a wavelet multiscaling method. We decompose daily data from U.S., British, Brazilian and Hong Kong stock markets indices in order to calculate the scale correlation between their illiquidities. The sample is divided in order to consider non-crisis, sub-prime crisis and Eurozone crisis. We find that there are chang...

Liquidity in U.S. Fixed Income Markets: A Comparison of the Bid-Ask Spread in Corporate, Government and Municipal Bond Markets

We examine the determinants of the realized bid-ask spread in the U.S. corporate, municipal and government bond markets for the years 1995 to 1997, based on newly available transactions data. Overall, we find that liquidity is an important determinant of the realized bid-ask spread all three markets. Specifically, in all markets, the realized bid-ask spread decreases in the trading volume. Addi...

The CDS Bond Basis Spread in Emerging Markets: Liquidity and Counterparty Risk E¤ects (Draft)

This paper explores the parity between CDS premiums and bond spreads for emerging market sovereign entities. Previous studies found that this parity holds between bonds and CDSs for US corporate debt. We …nd that this parity does not hold for Emerging Markets sovereign debt. In order to explain the pricing deviations we focus on two frictions, liquidity and counterparty risk. First, we present ...

Liquidity in Frictional Asset Markets