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Theoretical And Empirical Research On The Liquidity Of The China’s Interbank Bond Market

Posted on:2016-12-18Degree:MasterType:Thesis
Country:ChinaCandidate:Y L LuFull Text:PDF
GTID:2309330461956764Subject:Financial
Abstract/Summary:PDF Full Text Request
Since 1981, the recovery of issuing bonds, after more than 30 years of development, China’s bond market has become a very important part of financial market. It also made a great contribution to the development of the economy. In recent years, China’s bond market is growing rapidly, especially the interbank bond market. By means of issuing all kinds of bonds, the interbank bond market has provided an effective direct financing way for the issuers, such as governments, financial institutions and corporations. Moreover, the interbank bond market provides an important platform for the central bank open market operations. All in all, it has realized the important function of optimizing the allocation of resources from all aspects. However, compared with the mature bond markets in developed countries, there is still a big gap between China’s interbank bond market and theirs. One of the most serious problems is the liquidity of market.Liquidity is the basis of a market, the lack of liquidity will result all kinds of negative influence on the whole market, and eventually make the market go to decline. In theory, market liquidity can be described from these four aspects:transaction speed, transaction cost, transaction activity and the impact on the price. The faster the transaction deals, the smaller the transaction costs, the more active transaction is, and the smaller the impact on prices, the better the market liquidity will be. In practical, the bid-ask spread is one of the most basic indicators of market liquidity. In general, the smaller the bid-ask spread is, the better the market liquidity will be. The factors influencing the liquidity of bond market is numerous, mainly including the bond market trades, design of maturity, bond issuance, the market investors, market trading and settlement mechanism, the market transparency and shorting mechanism, etc.With the development of economy, China’s interbank bond market has become the main body of China’s bond market. But the domestic research on the liquidity of bond market mostly focused on the exchange market, and the empirical study of the liquidity of interbank bond market is not so much. This article will do theoretical and empirical analysis on the liquidity of China’s interbank bond market. First, on the basis of the pre-existing research, the article will analyze the liquidity of bond market and its influencing factors. Second, combining with the development course and current situation of China’s interbank bond market, the article will puts forward the existing problems in China’s interbank bond market. Third, this article will select the latest bond transaction data of China’s interbank bond market, then construct a linear regression model which could measure the liquidity of China’s interbank bond market. The empirical analysis will conclude correlation analysis, principal component analysis and factor analysis. Last, the article will put forward some policy suggestions to improve the liquidity of China’s interbank bond market.
Keywords/Search Tags:Interbank bond market, Liquidity, Bid-ask spread, Market Maker
PDF Full Text Request
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