Brown Bag Seminar with Philipp Schuster, Karlsruhe Institute of Technology

Upcoming Brown Bag Seminar with Philipp Schuster, Karlsruhe Institute of Technology

Tirsdag, 1 december, 2015 - 12:00 to 12:45

FRIC Center for Financial Frictions and the Department of Finance are pleased to announce the upcoming Brown Bag Seminar with Philipp Schuster, Karlsruhe Institute of Technology.
 

Philipp Schuster will present

PDF iconA Heterogeneous Agents Equilibrium Model for the Term Structure of Bond Market Liquidity
 

Authors:
Monika Gehde-Trapp, University of Hohenheim
Philipp Schuster, Karlsruhe Institute of Technology
Marliese Uhrig-Homburg, Karlsruhe Institute of Technology


ABSTRACT
We analyze the impact of market frictions on trading volume and liquidity premia of finite maturity assets when investors differ in their trading needs. In equilibrium, investors who trade frequently only invest in short-term assets and illiquidity spills over from short-term to long-term maturities. Our model predicts i) a hump-shaped relation between trading volume and maturity, ii) lower trading volumes of older compared to younger assets, iii) an increasing liquidity term structure when considering ask prices, and iv) a liquidity term structure from bid prices that is decreasing or U-shaped. Empirical tests for U.S. corporate bonds support our theoretical predictions.

Sidst opdateret: Department of Finance // 26/11/2015