The Study On The Liquidity Of Our Country's Government Bond Market

Liquidity is the vitality of the security market, the quality of market is usually weighed with the liquidity. A market, in which investors can trade large volume immediately with low transaction cost, without having a great impact on the market, is usually considered to be a market with high liquidity.In recent years, our government bond markets have developed very soon, but still face many problems. One major problem is that the markets are not very liquid so that the markets can't perform efficiently. The advancement of the government bond markets can not only reduce cost of issuing, but also make the financial market system perfect, as an important implement for microcosmic financial institution to manage market risk. It is essential to resolve the liquidity problem for the further development of the government bond markets. Therefore, it is of theoretical and practical meaning of studying the liquidity of our government bond markets, which has aroused great attention from many economists and practitioners in the financial markets.This paper starts with bond liquidity theory, analyzes the liquidity situation of our government bond market, especially exchange market with empirical data; discusses the related factors which have influence on the market liquidity; lastly puts forward some proposals to improve the markets liquidity on the basis of former analyses. The paper altogether divides into four chapters:The first chapter introduces notion of the liquidity, some measurement index of it, and then generalizes the related literatures. The foreign researches for liquidity have developed quite well and formed a relative integrated theory system. The researches have discussed the market liquidity from different points of view, such as the transaction mechanism, the trading market, the market participant, etc.Chapter 2 is about the development and current situation of our country's government bond market, including the history of the market development, the current market structure, the varieties of the transactions, the trade volumes occurring in Shanghai-Shenzhen exchange markets.Chapter 3 is about the empirical analyses of government bond market, and is the highlights of this paper, including three parts: In part one, we analyzes the overall market liquidity from two aspects (depth, width), and makes an international comparison. In the part two, combing with the monthly data of liquidity indices such as turnover rate, trading volume, trading frequency, we analyzes the situation and trend of the liquidity in the exchange market from 2002 to 2006, and analyzes the liquidity status of two different trading species respectively, then makes an comparison. In part 3, we further discusses the related factors which have influence on the market liquidity; including the stock market, the bond market, market participants, etc. we analyzes the correlations between the liquidity of government bond markets and some factors (the stock market and the bond market).Though above analyses, we could have a clear understanding about the liquidity in China's government bond markets and achieved some conclusions.The last chapter, combining our country's current situation, puts forward some proposals to improve liquidity of the markets on the basis of former analyses, the proposals are as follows: to establish a general settlement system, to generalize the government bond market, to develop the market-maker system, to optimize institutional investor structure and improve the establishment of the treasury investment fund, etc.As a postgraduate thesis, this paper is still under correction. Your advices would always be appreciated.