Noise as a liquidity measure: Evidence from the JGB market

37 Pages Posted: 19 Jun 2018 Last revised: 18 Jan 2021

See all articles by Takahiro Hattori

Takahiro Hattori

University of Tokyo - Graduate School of Public Policy

Date Written: January 1, 2019

Abstract

This paper analyzes the liquidity of the fixed-income market in Japan based on the noise measure proposed by Hu, Pan, and Wang (2013). We show this measure can capture the illiquidity in the Japanese market, especially during the liquidity crisis of 2008–2009. We also demonstrate that this measure can track the commonality of liquidity in the international capital market, especially after the financial crisis. Moreover, we show that this measure can track the degree of the limits to the arbitrage in the light of the risk aversion.

Keywords: Liquidity, Commonality of liquidity, Bank of Japan, JGB, Limits to Arbitrage

JEL Classification: E43, G18, G28, H12

Suggested Citation

Hattori, Takahiro, Noise as a liquidity measure: Evidence from the JGB market (January 1, 2019). Available at SSRN: https://ssrn.com/abstract=3197145 or http://dx.doi.org/10.2139/ssrn.3197145

Takahiro Hattori (Contact Author)

University of Tokyo - Graduate School of Public Policy ( email )

Tokyo
Japan

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