Economics, Econometrics and Finance
2 years ago

China's Corporate Bond Market Liquidity Premium Revealed: Impact on Investors!

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The Liquidity Premium in China’s Corporate Bond Market: A Stochastic Liquidity Discount Approach
Min Xiao-ping, Min Ji

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China's corporate bonds are less liquid than stocks, affecting their prices. A model was created to measure the liquidity risk premium in China's bond market. The liquidity level has the biggest impact on the premium, with other factors depending on it. Liquidity shocks and volatility also play a role, influenced by market conditions. The bond's term affects the premium directly and indirectly through its impact on liquidity.