Oeconomica Jadertina, Vol. 14 No. 1, 2024.
Original scientific paper
https://doi.org/10.15291/oec.4427
Liquidity score and bid-ask spread nexus: Empirical research on exchange traded bonds
Roberto Ercegovac
; OTP Bank d.d. Split
*
Snježana Pivac
orcid.org/0000-0001-6646-3524
; Faculty of Economics, Business and Tourism, Split
Marija Vuković
orcid.org/0000-0002-5383-6587
; Faculty of Economics, Business and Tourism, Split
* Corresponding author.
Abstract
Recognition of the liquidity of financial assets is important management and accounting
requirement in holding of the bank or trade book of financial security position. Financial theory explains
the securities prices bid-ask spread and market liquidity nexus. Market liquidity decreases inventory
costs of market makers and reduces the spread value. After the 2007 global financial crisis, Bloomberg
has developed a new comprehensive measure of liquidity, accepted by market professionals. Finding
the liquidity score and bid-ask spread nexus is the base research objective of the paper. The research of
the correlation between bid-ask spread and liquidity score value is done on the public listed fixed income
securities on Euronext and London Stock Exchange. The significant negative relations exist only on
high liquid debt securities, as well as non-liquid securities. Researching results can be used in investing
decisions strategies and in security portfolio classification under the International Financial Reporting
Standards requirement.
Keywords
liquidity measures, bid-ask spread, liquidity score, IFRS 13
Hrčak ID:
318441
URI
Publication date:
1.6.2024.
Visits: 29 *