THE LIQUIDITY AND INFORMATIONAL EFFICIENCY IN
STOCK AND BOND MARKET
The School of Accounting and Finance BINUS Business School-BINUS University
Jl. Hang Lekir 1 No. 6 Jakarta, 12120
Telp. +62 21 720 2222; Faks. +62 21 720 5555
This paper was taking a first step toward an integrated approach to stock and bond liquidity and informational efficiency. We drew from the literature to develop comprehensive understanding about liquidity and information event in stock and bonds market. We used variables from Chordia, et al. (2005), to explore cross-market liquidity dynamics by estimating a vector regressive model for liquidity such as bid-ask spread and depth, returns, volatility, and order flow in the stock and Treasury bond markets. We analyzed the work from Hotchkiss, et al. (2002) to find the informational efficiency of corporate bond prices. It was similar to that of the underlying stocks. The central contribution of this paper was to reveal the possibility in applying this kind of research in Indonesian market.
Key words: liquidity, informational efficiency, stock, bond, asset’s prices