Noise as Information for Illiquidity

• 成果类型: Article
• 署名作者: Hu, Grace Xing; Pan, Jun; Wang, Jiang
• 署名单位: University of Hong Kong; Massachusetts Institute of Technology (MIT); National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12083
• 发表日期: 2013
• 页码: 2341-2382
• 关键词: SERIAL-CORRELATION; term structure; cross-section; RISK; liquidity; equilibrium; MARKETS; premium; MODEL

摘要

We propose a market-wide liquidity measure by exploiting the connection between the amount of arbitrage capital in the market and observed noise in U.S. Treasury bondsthe shortage of arbitrage capital allows yields to deviate more freely from the curve, resulting in more noise in prices. Our noise measure captures episodes of liquidity crises of different origins across the financial market, providing information beyond existing liquidity proxies. Moreover, as a priced risk factor, it helps to explain cross-sectional returns on hedge funds and currency carry trades, both known to be sensitive to the general liquidity conditions of the market.