An analysis of liquidity skewness for European sovereign bond markets

Yan, Wei; Hamill, Philip; Li, Youwei; Vigne, Samuel A.; Waterworth, James

Abstract

We examine liquidity skewness by providing an analysis of bid-ask spreads for a comprehensive high-frequency dataset comprising Eurozone countries’ sovereign bonds. European sovereign bond markets exhibited increasing positive skewness over the sample period which was most extreme for Greece, Ireland and Portugal. We argue that positive skewness reflects decreased liquidity during volatile periods. We also report negative skewness in 2007. This can be explained by a feature of the limit-order book rubric of the MTS market where market-makers can submit limit-orders that are more competitive than the current best-price to reduce unwanted inventory without having to execute a market-order.

Citation

Yan, W., Hamill, P., Li, Y., Vigne, S. A., & Waterworth, J. (2018). An analysis of liquidity skewness for European sovereign bond markets. Finance research letters, 26, 274-280. https://doi.org/10.1016/j.frl.2018.02.027

• Journal Article Type: Article
• Acceptance Date: Feb 22, 2018
• Online Publication Date: Feb 23, 2018
• Publication Date: 2018-09
• Deposit Date: Mar 19, 2019
• Publicly Available Date: Mar 20, 2019
• Journal: Finance Research Letters
• Print ISSN: 1544-6123
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 26
• Pages: 274-280
• DOI: https://doi.org/10.1016/j.frl.2018.02.027
• Keywords: Liquidity; Skewness; Bid-ask spread; Sovereign bonds
• Public URL: https://hull-repository.worktribe.com/output/1113467
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S1544612318300801?via%3Dihub
• Additional Information: This article is maintained by: Elsevier; Article Title: An analysis of liquidity skewness for European sovereign bond markets; Journal Title: Finance Research Letters; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.frl.2018.02.027; Content Type: article; Copyright: © 2018 Elsevier Inc. All rights reserved.
• Contract Date: Mar 20, 2019