| The study on liquidity premium problem is longstanding. In 1979, Garbade and Silber mentioned liquidity premium problem in one paper. Amihud and Mendelson published a paper named Asset pricing and the bid-ask spread in 1986 which brought to a climax about the study on liquidity premium.Treasury bond market is one of core financial markets. But in China and developed countries, while numerous studies have examined the liquidity premium of the equity market, relatively few have examined the liquidity premium of the Treasury bonds market.Recurring to a new liquidity proxy, this paper finds that there are humps in treasury bonds liquidity structure graphs. Through a bond liquidity"life cycle"function, we find that bond age can provide important explanatory power for liquidity(market share) in these maturity sectors. Furthermore, we highlight the importance of expected average future liquidity in explaining Chinese Treasury bond liquidity premiums, and find that expected average future liquidity can give more contributions to explain Chinese Treasury bond values. So we give a series of policy suggestions in this paper to perfect Chinese Treasury bonds market.There are some deficiencies in this paper, e.g. lack of samples. |
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