ریسک نقدینگی برای حاکمیت اجرت های ریسک اوراق قرضه چقدر مهم است؟ مدارک و شواهد از بورس لندن

Using a unique data set, this paper studies the relationship between market liquidity risk and sovereign bond risk premia. The London Stock Exchange during the late 19th century is an ideal laboratory in which to examine the effect of market liquidity on sovereign bond prices. This period was the last time when the debt of a heterogeneous set of countries was traded in a centralized location and for which sufficiently long time series of observable bond prices are available to conduct asset-pricing tests. Empirical analysis of these data establishes two results. First, illiquid sovereign bonds carry larger factor loadings on market liquidity than liquid bonds. The difference in average excess returns is not only due to the larger transaction costs associated with holding illiquid bonds but also to the greater sensitivity of the returns of illiquid bonds to fluctuations in market liquidity. Second, excess bond returns are linearly related to the returns of a liquidity-mimicking portfolio in the cross-section, indicating that market liquidity is a priced common risk factor. At about 2.8% per year, the price for bearing liquidity risk is economically significant. Overall, this evidence underscores the importance of understanding the effect of market liquidity on bond prices, even in an economic environment that seems remote from today's.

Recent events suggest that liquidity risk may be an important component of sovereign bond risk premia. In the fall of 1998, the price of US Treasuries increased sharply relative to less liquid financial instruments in response to the Russian default, the failure of Long-Term Capital Management, and pervasive financial turbulence. More recently, the turmoil associated with the subprime mortgage crisis caused a systemic liquidity crisis in international financial markets and induced a shift into liquid US and European government bonds. For example, in early 2008 investors moved into German government bonds at the expense of less liquid debt instruments (Chung, 2008). To explain these patterns in terms of asset-pricing theory, market liquidity must be a priced common risk factor. That is, there must be a systematic component to variation in liquidity, and, overall, bonds must have low returns when the market becomes illiquid. Some bonds will be more sensitive to fluctuations in market liquidity and carry larger liquidity premia in the cross-section of excess bond returns. Using a unique data set collected from 19th century financial publications, I show that liquidity risk is important for pricing sovereign bonds. The London Stock Exchange before the First World War is an ideal laboratory for directly confronting the issue of market liquidity risk and sovereign bond risk premia. A centralized market for trading international debt is a relatively recent development and long time series of transaction data suitable for conducting asset-pricing tests are not widely available. In contrast to today, observable bid-ask spreads for a heterogeneous set of sovereign borrowers are available from the early 1870s until 1907. The data from the Exchange offer an excellent opportunity to study the liquidity premium in the international debt market. The paper reaches two conclusions. First, illiquid sovereign bonds tend to carry larger factor loadings on unexpected changes in market liquidity relative to liquid sovereign bonds, so their returns are more sensitive to these fluctuations. This finding is consistent with the demand for liquidity being sensitive to overall market liquidity; it implies that investors prefer sovereign debt that is easier to trade when market liquidity dries up. Second, market liquidity is a common risk factor important for pricing the cross-section of sovereign bond returns. At about 2.8% per year, the estimated liquidity premium is the largest of all the risk premia. Moreover, this estimate is broadly robust to controlling for the level effect of liquidity on bond prices. Thus, the data validate the predictions of models that postulate market liquidity is a state variable important for pricing international securities and underscore its enduring relevance. Section 2 discusses the features of the 19th century London Stock Exchange that make it an excellent testing ground for studying liquidity risk and sovereign bond risk premia. Section 3 presents the theoretical framework and empirical methods. Section 4 describes the data, as well as the market liquidity index and its time-series features. Section 5 presents the evidence and conducts a series of robustness tests.

Despite the importance of uncovering the economic signi fi cance of market liquidity risk in sovereign bond prices, contemporary data are ill-suited to answering this question. By contrast, a new data set containing all of the sovereign bonds regularly quoted on the London Stock Exchange during the late 19th century provides the best available case for studying this relationship. Empirical analysis of these data establishes two results. First, illiquid sovereign bonds carry larger factor loadings on fl uctuations in market liquidity relative to more liquid sovereign bonds. This evidence indicates that investors value a bond's liquidity and avoid holding illiquid bonds during periods when market liquidity dries up. It independently validates fi ndings from the US Treasury security market ( Li et al., 2009 ) and highlights the importance of fi nding a theoretical mechanism that ties investor demand for illiquid assets to market liquidity shocks. Second, liquidity risk is important for pricing sovereign debt. Cross-sectional differences in sovereign risk premia are linearly related to the covariance of bond returns with fl uctuations in market liquidity, indicating that market liquidity is a priced common risk factor. At about 2.8% per year, the liquidity premium's contribution to the sovereign risk premium is economically important. Taken together, this evidence underscores the generality of liquidity risk's fi rst-order effect on sovereign bond risk premia.