Arbeitspapier
The term structure of illiquidity premia
This paper investigates the dynamics of the term structure of bond market illiquidity premia using data on German bond market segments which differ only with respect to their liquidity. We analyze the interaction between different parts of the term structure and identify economic factors that drive the illiquidity premia. We obtain three main results: (i) The term structure of illiquidity premia is U-shaped on average but its shape varies over time. (ii) There is a strict separation between the short end and the long end of the term structure of illiquidity premia, i.e. we find no evidence for spill-over effects across different maturities. Different economic factors drive different parts of the term structure. The short end is mainly driven by asset market volatilities which suggests a fight-to-liquidity effect. In contrast, the long end depends on long-term business cycle economic prospects. This suggests that different parts of the term structure are determined by different investor clienteles with different liquidity needs. (iii) There is a smooth transition from short-term to long-term illiquidity premia. The longer the time to maturity of a bond, the less important market volatilities are and the more important long-term economic prospects become.
- Language
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Englisch
- Bibliographic citation
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Series: CFR working paper ; No. 09-14
- Classification
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Contingent Pricing; Futures Pricing; option pricing
- Subject
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bond liquidity
term structure of illiquidity premia
Rentenmarkt
Marktliquidität
Liquiditätspräferenz
Laufzeit
Schätzung
Deutschland
- Event
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Geistige Schöpfung
- (who)
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Kempf, Alexander
Korn, Olaf
Uhrig-Homburg, Marliese
- Event
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Veröffentlichung
- (who)
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University of Cologne, Centre for Financial Research (CFR)
- (where)
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Cologne
- (when)
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2009
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Kempf, Alexander
- Korn, Olaf
- Uhrig-Homburg, Marliese
- University of Cologne, Centre for Financial Research (CFR)
Time of origin
- 2009
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