Comparing possible proxies of corporate bond liquidity

Journal of Banking and Finance

Volumn 29, Issue 6, 2005, Pages 1331-1358

  Houweling, Patrick ^a   Mentink, Albert ^b,c   Vorst, Ton ^b,d  

^a Robeco Asset Management   (Netherlands)

^b ERASMUS UNIVERSITY ROTTERDAM   (Netherlands)

^c Aegon   (Netherlands)

^d ABN Amro ^*  (Netherlands)

Author keywords

Corporate bonds; Euro market; Fama French model; Liquidity

Indexed keywords

EID: 14944372012     PISSN: 03784266     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jbankfin.2004.04.007     Document Type: Article

References (52)

1. G.J. Alexander A.K. Edwards M.G. Ferri The determinants of trading volume of high-yield corporate bonds Journal of Financial Markets 3 2000 177-204
2. E.I. Altman Financial ratios, discriminant analysis and the prediction of corporate bankruptcy Journal of Finance 23 4 1968 589-609
3. Y. Amihud H. Mendelson Asset pricing and the bid-ask spread Journal of Financial Economics 17 1986 223-249
4. Y. Amihud H. Mendelson Liquidity, maturity, and the yields on US Treasury securities Journal of Finance 46 4 1991 1411-1425
5. Annaert, J., De Ceuster, M.J.K., 1999. Modelling European credit spreads. Working Paper, University of Antwerp-UFSIA. Available from
6. J. Boudoukh R.F. Whitelaw The benchmark effect in the Japanese government bond market Journal of Fixed Income 1 2 1991 52-59
7. J. Boudoukh R.F. Whitelaw Liquidity as a choice variable: A lesson from the Japanese government bond market Review of Financial Studies 6 2 1993 265-292
8. M.J. Brennan T. Chordia A. Subrahmanyam Alternative factor specifications, security characteristics, and the cross-section of expected stock returns Journal of Financial Economics 49 1998 345-373
9. M.J. Brennan A. Subrahmanyam Market microstructure and asset pricing: On the compensation for illiquidity in stock returns Journal of Financial Economics 41 3 1996 441-464
10. Chakravarty, S., Sarkar, A., 1999. Liquidity in US fixed income markets: A comparison of the bid-ask spread in corporate, government and municipal bond markets. Working Paper, Purdue University and Federal Reserve Bank of New York. Available from
11. T. Chordia R. Roll A. Subrahmanyam Market liquidity and trading activity Journal of Finance 56 2 2001 501-530
12. T. Chordia A. Subrahmanyam V.R. Anshuman Trading activity and expected stock returns Journal of Financial Economics 59 2001 3-32
13. P. Collin-Dufresne R.S. Goldstein J.S. Martin The determinants of credit spread changes Journal of Finance 56 6 2001 2177-2207
14. B. Cornell Liquidity and the pricing of low-grade bonds Financial Analysts Journal 48 1 1992 63-68
15. L.E. Crabbe C.M. Turner Does the liquidity of a debt issue increase with its size? Evidence from the corporate bond and medium-term note markets Journal of Finance 50 5 1995 1719-1734
16. A. Díaz E. Navarro Yield spread and term to maturity: Default vs. liquidity European Financial Management 8 4 2002 449-477
17. Dimson, E., Hanke, B., 2001. The expected illiquidity premium: Evidence from equity index-linked bonds. Working Paper, London Business School. Available from
18. E.J. Elton T.C. Green Tax and liquidity effects in pricing government bonds Journal of Finance 53 5 1998 1533-1562
19. Elton, E.J., Gruber, M.J., Agrawal, D., Mann, C., 2002. Factors affecting the valuation of corporate bonds. Working Paper, Stern School of Business, New York University. Available from
20. Ericsson, J., Renault, O., 2001. Liquidity and credit risk. Working paper, McGill University and Universite Catholique de Louvain. Available from
21. E.F. Fama K.R. French Common risk factors in the returns on stocks and bonds Journal of Financial Economics 33 1 1993 3-56
22. L. Fisher Determinants of the risk premiums on corporate bonds Journal of Political Economy 67 1959 217-237
23. M.J. Fleming Are larger Treasury issues more liquid? Evidence from bill reopenings Journal of Money, Credit, and Banking 3 2 2002 707-735
24. M.S. Fridson J.G. Jónsson Spread versus Treasuries and the riskiness of high-yield bonds Journal of Fixed Income 5 3 1995 79-88
25. M. Garman Market microstructure Journal of Financial Economics 3 1976 257-275
26. Gebhardt, W.R., Hvidkjaer, S., Swaminathan, B., 2001. The cross-section of expected corporate bond returns: Betas or characteristics? Working Paper, Axia Energy Europe, University of Maryland and Cornell University. Available from
27. A.K. Gehr T.F. Martell Pricing efficiency in the secondary market for investment-grade corporate bonds Journal of Fixed Income 2 3 1992 24-38
28. Goldreich, D., Hanke, B., Nath, P., 2002. The price of future liquidity: Time-varying liquidity in the US Treasury market. Working Paper, London Business School, Institute of Finance and Accounting. Available from
29. B. Golub L. Tilman No room for nostalgia in fixed income Risk July 2000 44-48
30. W.H. Greene Econometric Analysis fourth ed. 2000 Prentice Hall Englewood Cliffs, NJ
31. R.A. Haugen N.L. Baker Commonality in the determinants of expected stock returns Journal of Financial Economics 41 1996 401-439
32. G. Hong A. Warga An empirical study of bond market transactions Financial Analysts Journal 56 2 2000 32-46
33. Jankowitsch, R., Mösenbacher, H., Pichler, S., 2002. Measuring the liquidity impact on EMU government bond prices. Working Paper, Vienna University, CCEFM and Bank Austria. Available from
34. R.A. Jarrow S.M. Turnbull Pricing derivatives with credit risk Journal of Finance 50 1 1995 53-85
35. A. Kamara Liquidity, taxes, and short-term treasury yields Journal of Financial and Quantitative Analysis 29 3 1994 403-417
36. A. Kempf M. Uhrig-Homburg Liquidity and its impact on bond prices Schmalenbach Business Review 52 2000 26-44
37. Kocić, A., Quintos, C., Yared, F., 2000. Identifying the benchmark security in a multifactor spread environment. Fixed Income Derivatives Research, Lehman Brothers, New York
38. A. Krishnamurthy The bond/old-bond spread Journal of Financial Economics 66 2-3 2002 463-506
39. Lehman Brothers, 1998. Introduction to the Pan-European Aggregate Index, Research document, Fixed Income Research
40. A.W. Lo A.C. MacKinlay Data-snooping biases in tests of financial asset pricing models Review of Financial Studies 3 3 1990 413-467
41. T. Lys J.S. Sabino Research design issues in grouping-based tests Journal of Financial Economics 32 3 1992 355-387
42. McGinty, L., 2001. Issue size versus liquidity in credit. J.P. Morgan Fixed Income Research
43. D.J. Mullineaux I.C. Roten Liquidity, labels, and medium-term notes Financial Markets, Institutions and Instruments 11 2002 401-423
44. W. Newey K. West A simple positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix Econometrica 55 1987 703-708
45. O. Sarig A.D. Warga Bond price data and bond market liquidity Journal of Financial and Quantitative Analysis 24 3 1989 367-378
46. P. Schultz Corporate bond trading costs and practices: A peek behind the curtain Journal of Finance 56 2 2001 677-698
47. J. Shulman M. Bayless K. Price Marketability and default influences on the yield premia of speculative-grade debt Financial Management 22 3 1993 132-141
48. S. Smidt Which road to an efficient stock market: Free competition or regulated monopoly Financial Analysts Journal 27 5 1971 18-20
49. Strebulaev, I.A., 2001. Many faces of liquidity and asset pricing: Evidence from the US treasury securities market. Working Paper, London Business School. Available from
50. Tychon, P., Vannetelbosch, V., 2002. Debt valuation and marketability risk. Working paper, Université Catholique de Louvain. Available from
51. D. Vayanos Transaction costs and asset prices: A dynamic equilibrium model Review of Financial Studies 11 1 1998 1-58
52. A.D. Warga Bond returns, liquidity and missing data Journal of Financial and Quantitative Analysis 27 4 1992 605-617