DRIVERS OF ILLIQUIDITY IN THE ASEAN SOVEREIGN BOND MARKET

  • Harald Kinateder University of Passau
  • Robert Bauer University of Passau
  • Niklas Wagner University of Passau
Keywords: ASEAN-5 countries;, Arbitrage capital, Illiquidity, Noise measure, GARCH, Sovereign bond market

Abstract

We study illiquidity in ASEAN-5 sovereign bond markets from 2008 to 2019 by using an illiquidity measure, which is based on a proxy of the amount of arbitrage capital available in sovereign bond markets. Our analysis identifies three drivers of illiquidity in Singapore, namely economic policy uncertainty, the default spread and the GDP growth rate. In contrast, liquidity of all other markets is mostly not characterized by economic drivers. It appears that overall liquidity is lower in the markets outside Singapore and therefore deviations in these yield curves are higher on average and arbitrage eliminates larger deviations not immediately but in a delayed manner.

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Published
2020-12-31
How to Cite
Kinateder, H., Bauer, R., & Wagner, N. (2020). DRIVERS OF ILLIQUIDITY IN THE ASEAN SOVEREIGN BOND MARKET. Buletin Ekonomi Moneter Dan Perbankan, 23(4), 501 - 524. https://doi.org/10.21098/bemp.v23i4.1453
Section
Articles

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