LOGIN TO YOUR ACCOUNT

Username
Password
Remember Me
Or use your Academic/Social account:

CREATE AN ACCOUNT

Or use your Academic/Social account:

Congratulations!

You have just completed your registration at OpenAire.

Before you can login to the site, you will need to activate your account. An e-mail will be sent to you with the proper instructions.

Important!

Please note that this site is currently undergoing Beta testing.
Any new content you create is not guaranteed to be present to the final version of the site upon release.

Thank you for your patience,
OpenAire Dev Team.

Close This Message

CREATE AN ACCOUNT

Name:
Username:
Password:
Verify Password:
E-mail:
Verify E-mail:
*All Fields Are Required.
Please Verify You Are Human:
fbtwitterlinkedinvimeoflicker grey 14rssslideshare1
Dufour, Alfonso; Nguyen, Minh (2012)
Publisher: Taylor and Francis
Languages: English
Types: Article
Subjects:
We analyze four years of transaction data for euro-area sovereign bonds traded on the MTS electronic platforms. In order to measure the informational content of trading activity, we estimate the permanent price response to trades. We find not only strong evidence of information asymmetry in sovereign bond markets, but we also show the relevance of information asymmetry in explaining the cross-sectional variations of bond yields across a wide range of bond maturities and countries. Our results confirm that trades of more recently issued bonds and longer maturity bonds have a greater permanent effect on prices. We compare the price impact of trades for bonds across different maturity categories and find that trades of French and German bonds have the highest long-term price impact in the short maturity class whereas trades of German bonds have the highest permanent price impacts in the long maturity class. More importantly, we study the cross-section of bond yields and find that after controlling for conventional factors, investors demand higher yields for bonds with larger permanent trading impact. Interestingly, when investors face increased market uncertainty, they require even higher compensation for information asymmetry.
  • The results below are discovered through our pilot algorithms. Let us know how we are doing!

    • Admati, A. R., and P. C. Pfleiderer. 1988. A theory of intraday patterns: Volume and price variability. Review of Financial Studies 1, no. 1: 3-40.
    • Amihud, Y., and H. Mendelson. 1991. Liquidity, maturity, and the yields on U.S. treasury securities. Journal of Finance 46, no. 4: 1411-1425.
    • Balduzzi, P., E. J. Elton, and T. C. Green. 2001. Economic news and bond prices: Evidence from the U.S. treasury market. Journal of Financial and Quantitative Analysis 36, no. 4: 523-543.
    • Beber, A., M. W. Brandt, and K. A. Kavajecz. 2009. Flight-to-quality or flight-toliquidity? Evidence from the Euro-area bond market. Review of Financial Studies 22, no. 3: 925-957.
    • Bessembinder, H. 2002. Tick size, spreads, and liquidity: An analysis of Nasdaq Securities trading near ten dollars. Journal of Financial Intermediation 9, no.3: 213-239.
    • Black, F., M. Jensen, and M. Scholes. eds. 1972. The capital asset pricing model: Some empirical tests. New York: Praeger.
    • Blair, B. J., S.-H. Poon, and S. J. Taylor. 2001. Forecasting S&P 100 volatility: The incremental information content of implied volatilities and high-frequency index returns. Journal of Econometrics 105, no. 1: 5-26.
    • Blanco, R., S. Brennan, and I. W. Marsh. 2005. An empirical analysis of the dynamic relation between investment-grade bonds and credit default swaps. Journal of Finance 60, no. 5: 2255-2281.
    • Brandt, M. W., and K. A. Kavajecz. 2004. Price discovery in the U.S. treasury market: The impact of orderflow and liquidity on the yield curve. Journal of Finance 59, no. 6: 2623-2654.
    • Brennan, M. J., and A. Subrahmanayam. 1996. Market microstructure and asset pricing: On the compensation for illiquidity in stock returns. Journal of Financial Economics 41, no. 3: 441-464.
    • Calomiris, C. W. 2009. The subprime turmoil: What's old, what's new, and what's next. Journal of Structured Finance 15, no. 1: 6-52.
    • Cao, H. H., M. D. Evans, and R. K. Lyons. 2006. Inventory information. Journal of Business 79, no. 1: 325-364.
    • Cheung, Y.-W., and C. Y.-P. Wong. 2000. A survey of market practitioners' views on exchange rate dynamics. Journal of International Economics 51, no. 2: 401- 419.
    • Chordia, T., R. Roll, and A. Subrahmanyam. 2002. Order imbalance, liquidity, and market returns. Journal of Financial Economics 65, no. 1: 111-130.
    • Codogno, L., C. Favero, and A. Missale. 2003. Yield spreads on EMU government bonds. Economic Policy 18, no. 37: 503-532.
    • Connolly, R., C. T. Stivers, and L. Sun. 2005. Stock market uncertainty and the stockbond return relation. Journal of Financial and Quantitative Analysis 40, no. 1: 161-194.
    • Constantinides, G. M. 1986. Capital market equilibrium with transaction costs. Journal of Political Economy 94, no. 4: 842-862.
    • Coval, J. D., and T. Shumway. 2001. Expected Option Returns. Journal of Finance 56, no. 3: 983-1009.
    • Dufour, A., and R. F. Engle. 2000. Time and the price impact of a trade. Journal of Finance 55, no. 6: 2467-2498.
    • Dufour, A., and M. Nguyen. 2008. Time-varying price discovery in the European Treasury markets. ICMA Centre, University of Reading. Working Paper Series.
    • Dufour, A., and F. S. Skinner. 2004. MTS time series: Market and data description for the European bond and repo database. ICMA Centre, University of Reading. Working Paper 2004-07.
    • Dunne, P. G., M. J. Moore, and R. Portes. 2007. Benchmark status in fixed-income asset markets. Journal of Business Finance and Accounting 34, no. 9-10: 1615-1634.
    • Easley, D., S. Hvidkjaer, and M. O'Hara. 2002. Is information risk a determinant of asset returns? Journal of Finance 57, no. 5: 2185-2221.
    • ECB. 2004. The Euro bond market study. European Central Bank, Frankfurt.
    • Fama, E. F., and J. D. MacBeth. 1973. Risk, return and equilibrium: Empirical tests. Journal of Political Economy 81, no. 3: 607-636.
    • Fleming, J. 1998. The quality of market volatility forecasts implied by S&P 100 index option prices. Journal of Empirical Finance 5, no. 4: 317-345.
    • Fleming, M. J. 2001. Measuring treasury market liquidity. Working paper 133, Federal Reserve Bank of New York.
    • Garleanu, N., and L. H. Pedersen. 2004. Adverse selection and the required return. Review of Financial Studies 17, no. 3: 643-665.
    • Gebhardt, W. R., S. Hvidkjaer, and B. Swaminathan. 2005. The cross-section of expected corporate bond returns: Betas or characteristics. Journal of Financial Economics 75, no. 1: 85-114.
    • Goldstein, M. A., and A. K. Kavajecz. 2000. Eighths, sixteenths and market depth: Changes in tick size and liquidity provision on the NYSE. Journal of Financial Economics 56, no. 1: 125-149.
    • Green, C. T. 2004. Economic news and the impact of trading on bond prices. Journal of Finance 59, no. 3: 1201-1234.
    • Hasbrouck, J. 1991a. Measuring the information content of stock trades. Journal of Finance 46, no. 1: 179-207.
    • Hasbrouck, J. 1991b. The summary informativeness of stock trades: An econometric analysis. Review of Financial Studies 4, no. 3: 571-595.
    • Hasbrouck, J. 2003. Intraday price formation in U.S. equity index markets. Journal of Finance 58, no. 6: 2375-2399.
    • Hasbrouck, J. 2007. Empirical Market Microstructure: The institutions, economics, and econometrics of securities trading. New York: Oxford University Press.
    • Houweling, P., A. Mentink, and T. Vorst. 2005. Comparing possible proxies of corporate bond liquidity. Journal of Banking and Finance 29, no. 6: 1331- 1358.
    • IMF. 2001. The changing structure of major government securities markets: implications for private financial markets and key policy issues. International Monetary Fund, Washington.
    • Ito, T., R. K. Lyons, and M. T. Melvin. 1998. Is there private information in the foreign exchange market? The Tokyo experiment. Journal of Finance 53, no. 3: 1111-1130.
    • Krishnamurthy, A. 2002. The bond/old-bond spread. Journal of Financial Economics 66, no. 2-3: 463-506.
    • Li, H., J. Wang, C. Wu, and Y. He. 2009. Are liquidity and information risks priced in the Treasury bond market? Journal of Finance, 64, no. 1: 467-503.
    • Malz, A. M. 2003. Liquidity risk: Current research and practice. Risk Metrics Group, New York.
    • Nelson, C. R., and A. F. Siegel. 1987. Parsimonious modeling of yield curves. Journal of Business 60, no.4: 473-489.
    • O'Hara, M. 2003. Presidential address: Liquidity and price discovery. Journal of Finance 58, no. 4: 1335-1354.
  • No related research data.
  • No similar publications.

Share - Bookmark

Cite this article