We compare trading costs in the U.S. Treasury bond market with U.S. corporate and municipal bond markets, based on newly available transaction data. We estimate that the mean bid-ask spread per $100 par value is 23 cents for municipal bonds, 21 cents for corporate bonds and 8 cents for Treasury...

The liquidity of the stock market is a multifaceted and abstract concept, which is why it is difficult to measure. Emerging stock markets differ from the developed ones due to the lower liquidity, the level of protection of investors, the investment interest, the attractiveness of the...

Let us consider a financially constrained leveraged financial firm having some divisions which have invested into some risky assets. Using coherent measures of risk the sum of the capital requirements of the divisions is larger than the capital requirement of the firm itself, there is some...

We assess the effect of aggregate stock market illiquidity on U.S. Treasury bond risk premia. We find that the stock market illiquidity variable adds to the well established Cochrane-Piazzesi and Ludvigson-Ng factors. It explains 10%, 9%, 7%, and 7% of the one-year-ahead variation in the excess...

This paper investigates the relationship between market liquidity and bank-dominated corporate governance structure of Japanese listed firms, represented as main bank relationships and cross shareholdings. We find that (i) main bank lending relationships increase market liquidity and reduce...

Risk allocation games are cooperative games that are used to attribute the risk of a financial entity to its divisions. In this paper, we extend the literature on risk allocation games by incorporating liquidity considerations. A liquidity policy specifies state-dependent liquidity requirements...

In recent years, a number of electronic limit order markets have reintroduced market makers for some securities (Designated Market Makers). This trend has mainly been initiated by financial intermediaries and listed firms themselves, without any regulatory pressure. In this paper we ask why...

This paper derives arbitrage trading strategies taking into account the fact that the actions of arbitrageurs impact prices. This avoids the difficulty of having to rely on exogenous position limits to prevent infinite arbitrage profits. When arbitrageurs are financially constrained their...

Risk allocation games are cooperative games that are used to attribute the risk of a financial entity to its divisions. In this paper, we extend the literature on risk allocation games by incorporating liquidity considerations. A liquidity policy specifies state-dependent liquidity requirements...

The long haul across capital-intensive growth in China will gradually come to an end. As a “silent revolution”, the financial reform taking place is laying the foundations for a modern market economy, in which the efficient allocation of capital should ensure a steady growth rate. Supported...