Determinants of bid-ask spread in emerging sovereign bond markets

Su E., Tokmakçıoğlu K.

Journal of Asset Management, cilt.24, sa.5, ss.346-352, 2023 (ESCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 24 Sayı: 5
  • Basım Tarihi: 2023
  • Doi Numarası: 10.1057/s41260-023-00305-4
  • Dergi Adı: Journal of Asset Management
  • Derginin Tarandığı İndeksler: Emerging Sources Citation Index (ESCI), Scopus, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit
  • Sayfa Sayıları: ss.346-352
  • Anahtar Kelimeler: Bid-ask spread, Market liquidity, Emerging markets, Sovereign bond market
  • İstanbul Teknik Üniversitesi Adresli: Evet

Özet

Major emerging market countries issue significant amounts of local currency bonds in order to finance their budget deficits. As liquidity is a substantial feature of the financial markets, understanding bond liquidity dynamics is essential. The bid-ask spread is an important measure of bond liquidity and reflects explicit transaction costs. We apply a panel regression model in order to analyze bond-level and country-level characteristics’ effects on bond liquidity and bid-ask spread. Results show that volatility, credit risk and duration have significant effects on emerging market bond liquidity. Emerging market sovereign bonds with lower volatility, lower credit risk and shorter duration have narrower bid-ask spreads, on average.