Research on Liquidity Risk of Corporate Bond Spread in China

摘要

The paper focuses on liquidity risk of corporatebond, and it collects panel data from 2014 to 2018 in Corporatebond Exchange center in China. It measures liquidity by issuedamount, trading turnover, squared price return, volume andbond age. In the regression Squared price return is significant,and the squared price return could indicate to what extent thebond is underpriced. At the same time, corporate bond tradingvolumes increase, but liquidity risk premium decreases, so thecorporate bond spread decreases. Also, the large issued amountindicates high liquidity. In the paper, it finds that the thresholdof 12 months is the best in corporate bond market in Exchangein China, and the liquidity risk premium which presented byage is a very important part in corporate bond spread. Theresults above are consistent with the hypotheses. But in theregression, the variable of corporate bond trades is positivelycorrelated with corporate bond spread, and it’s different fromthe null hypothesis. It infers that there’re several reasons,maybe too much missing data in the sample or the samples arein an economic crisis period. Overall, issued amount, squaredprice return, volume and trading turnover are proxies ofliquidity risk, however they are less important than bond age.