Liquidity as a long-term structural factor affecting asset pricing in Kazakhstan
https://doi.org/10.46914/1562-2959-2020-1-4-274-278
Abstract
Liquidity is an important factor for the proper functioning of the securities market. Deeply liquid markets allow investors buy or sell large amounts of securities without affecting their prices. Liquidity of securities may affect their prices and frequency of trades: investors would sell papers with discount or wait for relevant buyers with adequate prices. There is low liquidity of corporate bonds markets in countries with emerging economies. During crisis time in the market the risk of liquidity emerges and bonds become quite difficult to sell, not to mention the sale under usual conditions. From foreign investors’ perspective bonds issued in local currency could be risky as well. During market crisis the correlation between liquidity and currency strength becomes positive. On some emerging markets there was a problem of pricing of bonds due to few trades with bonds. Absence of daily quotes for corporate bonds under conditions of low liquidity of government bonds could pose a problem. For instance, in the bond market in Chile despite of institutional investors, there was no daily market value of bonds due to low market liquidity. The author analyzed trades with corporate bonds for the last 5 years. The author found out low frequency of trades and absence of up to date prices for some maturities. As a result, the Kazakhstan securities market operates a fragmented interest rate yield curve with yields on multiple maturities.
References
1. Report of Emerging Markets Committee of the International Organization of Securities Commissions in collaboration with the World Bank Group, “Development of Corporate Bond Markets in the Emerging Markets”, November, 2011.
2. Easley D., O´Hara M. Is Information Risk a Determinant of Asset Returns? Journal of Finance, 2002, vol. 57, issue 5, 2185–2221.
3. Amihud Yakov, Mendelson Haim. Asset pricing and the bid-ask spread Journal of Financial Economics, 1986, vol. 17, issue 2, 223–249.
4. Brennan М., Subrahmanyam A. Market microstructure and asset pricing: On the compensation for illiquidity in stock returns. Journal of Financial Economics, 1996, vol. 41, issue 3, 441–464.
5. Aiyagari S., Gertler M. Asset returns with transactions costs and uninsured individual risk. Journal of Monetary Economics, 1991, vol. 27, issue 3, 311–331.
6. Vayanos D., Vila J.L. Equilibrium interest rate and liquidity premium with transaction costs. Economic Theory, 1999, vol.13, 509–539.
7. Mahanti S., Nashikkar A., Subrahmanyam M., Chacko G., Mallik G. “Latent liquidity: A new measure of liquidity, with an application to corporate bonds”. Journal of Financial Economics, 2008, vol. 88, issue 2, 272–298.
8. Cortazar G., Schwartz E.S., Naranjo L. Term Structure Estimation in Markets with Infrequent Trading. International Journal of Finance and Economics, Volume12, Issue 4, 2007, 353–369.
9. FTSE Country Classification Process September 2017.
Review
For citations:
Tatibekova A.N. Liquidity as a long-term structural factor affecting asset pricing in Kazakhstan. Bulletin of "Turan" University. 2020;(4):274-278. (In Russ.) https://doi.org/10.46914/1562-2959-2020-1-4-274-278
Views: 370
Email this article 