Abstract

http://ssrn.com/abstract=687523
 
 

References (36)



 
 

Citations (1)



 


 



Liquidity, Information Risk, and Asset Pricing: Evidence from the U.S. Government Bond Market


Chunchi Wu


Universtity at Buffalo

Haitao Li


University of Michigan - Stephen M. Ross School of Business; Cheung Kong Graduate School of Business; Cheung Kong Graduate School of Business

Yan He


Indiana University Southeast - School of Business

Junbo Wang


City University of HongKong


AFA 2006 Boston Meetings Paper

Abstract:     
We examine the effects of liquidity and information risks on expected returns of U.S. government bonds. Information risk is measured by probability of information-based trading (PIN) derived from the market microstructure model of Easley, Hvidkjaer, and O'Hara (2002). Liquidity risk is captured by sensitivity of individual bond returns to a market-wide liquidity measure along the line of Pastor and Stambaugh (2003). Controlling for systematic risks and bond characteristics, we find that both liquidity and information risks have a significantly positive effect on expected bond returns. Our findings suggest that incorporating microstructure factors into existing term structure models is a promising avenue for improving our understanding of bond price behavior.

Number of Pages in PDF File: 60

Keywords: Information risk, Liquidity risk, PIN, asset pricing, order imbalance

JEL Classification: G12, M41

working papers series


Download This Paper

Date posted: March 23, 2005  

Suggested Citation

Wu, Chunchi and Li, Haitao and He, Yan and Wang, Junbo, Liquidity, Information Risk, and Asset Pricing: Evidence from the U.S. Government Bond Market. AFA 2006 Boston Meetings Paper. Available at SSRN: http://ssrn.com/abstract=687523 or http://dx.doi.org/10.2139/ssrn.687523

Contact Information

Chunchi Wu (Contact Author)
Universtity at Buffalo ( email )
School of Management
335A Jacobs Management Center
Buffalo, NY 14260
United States
Haitao Li
University of Michigan - Stephen M. Ross School of Business ( email )
701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-615-5475 (Phone)
Cheung Kong Graduate School of Business ( email ) ( email )
Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China
Cheung Kong Graduate School of Business ( email ) ( email )
Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China
Yan He
Indiana University Southeast - School of Business ( email )
4201 Grant Line Road
New Albany, IN 47150
United States
812-941-2308 (Phone)
812-941-2672 (Fax)
Junbo Wang
City University of HongKong ( email )
88 Tat Chee Ave.
Kowloon Town
Hong Kong
Hong Kong
852-2788-7243 (Phone)
852-2788-8806 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 3,549
Downloads: 736
Download Rank: 17,842
References:  36
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.406 seconds