Exploring Determinant Factors of Bond Trading with Inventory Management Theory (Case Study of Indonesian Capital Market, January-March 2009)

Indonesian Capital Market Review (ICMR), Vol. II, No. 2, pp. 87-108, July 2010

22 Pages Posted: 23 Feb 2011 Last revised: 15 Nov 2015

See all articles by Imam Wahyudi

Imam Wahyudi

University of Indonesia (UI) - Department of Management, Faculty of Economics and Business, University of Indonesia

Date Written: April 1, 2010

Abstract

This paper studies trading volume of 206 recorded and publicly traded bonds in Indonesian Capital Market on January 4th-March 9th 2009 observed period. The data covers almost all trading data in the market and all brokers that exist. The microstructure data used in this study is a complete understanding for almost every phenomenon in the market, and thus could explain more about bond liquidity. We find that some bonds are actively traded and most are rare. We also construct some determinant facto tests of bond trading volume, included descriptive statistic, GLS, and other formal test. We find that bonds with larger par value and more seasoned tend to have smaller trading volume. We also find that private bonds are actively traded more than public bonds (both government institution and private institution bond). Interest rate risk and bond price volatility are positively influence bond trading volume, but opposite for bond rating. We find that bond with higher probability to default have smaller trading volume. While comparing the bond volume data with stock price data, we find that the relationship in two markets is not linier as the convenient theory in finance said.

Keywords: bond trading volume, liquidity, information transparency, substitution effect, private stock, default risk

Suggested Citation

Wahyudi, Imam, Exploring Determinant Factors of Bond Trading with Inventory Management Theory (Case Study of Indonesian Capital Market, January-March 2009) (April 1, 2010). Indonesian Capital Market Review (ICMR), Vol. II, No. 2, pp. 87-108, July 2010, Available at SSRN: https://ssrn.com/abstract=1766247

Imam Wahyudi (Contact Author)

University of Indonesia (UI) - Department of Management, Faculty of Economics and Business, University of Indonesia ( email )

Jl. Prof. Dr. Sumitro Djojohadikusumo,
Kampus UI Depok
Depok, West Java 16424
Indonesia
+62217272425 (Phone)
+62217863556 (Fax)

HOME PAGE: http://staff.ui.ac.id

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