Hostname: page-component-745bb68f8f-s22k5 Total loading time: 0 Render date: 2025-01-12T11:32:59.285Z Has data issue: false hasContentIssue false
  • English
  • Français

Bond Price Data and Bond Market Liquidity

Published online by Cambridge University Press:  06 April 2009

Oded Sarig  and
Arthur Warga
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper attempts to characterize liquidity-driven noise in the CRSP Government Bond price data set by comparing these price records to the independently collected Shearson Lehman Brothers (SLB) Bond Data Base. We argue that discrepancies between the data sets are due largely to liquidity-driven price errors, and we show that they are systematically related to certain bond characteristics. On the other hand, these discrepancies are small in magnitude and are approximately mean zero. We examine data filters based on observable bond characteristics and show that these filters can reduce the noise in price records while preserving their mean zero nature. The effects of these errors on performance evaluation are investigated by comparing results using filtered and unfiltered data.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 24 , Issue 3 , September 1989 , pp. 367 - 378
Copyright
Copyright © School of Business Administration, University of Washington 1989

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Dimson, E. “Risk Measurement when Shares are Subject to Infrequent Trading.” Journal of Financial Economics, 7 (06 1979), 197–226.CrossRefGoogle Scholar
Fama, E. “Term Premiums in Bond Returns.” Journal of Financial Economics, 13 (12 1984), 529–546.CrossRefGoogle Scholar
Fisher, L. “Determinants of Risk Premiums on Corporate Bonds.” The Journal of Political Economy, 67 (06 1959), 217–237.CrossRefGoogle Scholar
Garbade, K. D., and Silber, W. L.. “Price Dispersion in the Government Securities Market.” The Journal of Political Economy, 84 (08 1976), 721–740.CrossRefGoogle Scholar
Garbade, K. D., and Rosey, I.. “Secular Variation in the Spread between Bid and Offer Prices on U.S. Treasury Coupon Issues.” Business Economics, 12 (09 1977), 45–49.Google Scholar
Haugen, R. “Modern Investment Theory.” Englewood Cliffs, NJ: Prentice Hall (1986).Google Scholar
McCulloch, H. “The Monotonicity of the Term Premium: A Closer Look.” Journal of Financial Economics, 18 (03 1987), 185–192.CrossRefGoogle Scholar
Nunn, K.; Hill, J.; and Schneeweis, T.. “Corporate Bond Price Data Sources and Return/Risk Measurement.” Journal of Financial and Quantitative Analysis, 21 (06 1986), 197–208.CrossRefGoogle Scholar
Roll, R. “A Simple Implicit Measure of the Effective Bid Ask Spread in an Efficient Market.” Journal of Finance, 39 (09 1984), 1127–1140.Google Scholar
Roll, R. “The Behavior of Interest Rates: The Application of the Efficient Market Model to U.S. Treasury Bills.” New York: Basic Books (1970).Google Scholar
Scholes, M., and Williams, J.. “Estimating Beta from Nonsynchronous Data.” Journal of Financial Economics, 5 (12 1977), 309–327.CrossRefGoogle Scholar