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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26302
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| Title: | Latent Liquidity: A New Measure of Liquidity, with an Application
Corporate Bonds |
| Authors: | Mahanti, Sriketan
Nashikkar, Amrut
Marti, Subrahmanyam
Chacko, George |
| Keywords: | Fixed Income
Corporate Bonds
Liquidity
Asset Pricing
Market Microstructure |
| Issue Date: | 7-Nov-2007 |
| Series/Report no.: | FIN-07-012 |
| Abstract: | We present a new measure of liquidity known as “latent
liquidity” and apply it to a unique corporate bond database.
Latent liquidity is defined as the weighted average turnover of
investors who hold a bond, in which the weights are the fractional
investor holdings. It can be used to measure liquidity in markets with
sparse transactions data. For bonds that trade frequently, our measure
has predictive power for both transaction costs and the price impact of
trading, over and above trading activity and bond-specific
characteristics thought to be related to liquidity. Additionally, this
measure exhibits relationships with bond characteristics similar to
those of other trade-based measures. |
| URI: | http://hdl.handle.net/2451/26302 |
| Appears in Collections: | Finance Working Papers
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