e-ISSN 2231-8542
ISSN 1511-3701

Home / Regular Issue / JTAS Vol. 26 (S) Aug. 2018 / JSSH-S0701-2018


The Impact of Information Transmission and Liquidity toward Indonesian Corporate Bond Yield Spread

Antonius Siahaan, Irwan Adi Ekaputra and Buddi Wibowo

Pertanika Journal of Tropical Agricultural Science, Volume 26, Issue S, August 2018

Keywords: Indonesian corporate bond, information risk, Probability of Informed Trading, systematic liquidity, yield spread

Published on: 26 June 2018

This research aims to investigate whether information risk and liquidity become yield spread determinants of Indonesian corporate bond market. This study uses market microstructure approach. Previous research had revealed the impact of Volatility Model or the information effect on transaction (Balduzi et al., 1999; Brandt & Kavajecz, 2004; Green, 2004) and the sequential trade models used by Easley et al. (2002). In this research, information risk is measured by Probability of Informed Trading (PIN) model, liquidity is measured using Lesmond-Ogden-Trzcinka (LOT) model, and the Pastor and Stambaugh model is used to measure systematic liquidity risk. Using intraday transaction data of Indonesian corporate bonds during 2006-2011, all three main variables were found to influence Indonesian corporate bond yield spread. The average PIN of Indonesian corporate bonds is 7.98%, which is lower than that of the US market. The average LOT for the Indonesian corporate bond is 310 bps, which is less than that of the US market, and investor demand of illiquid bonds is more sensitive to systematic liquidity than liquid bonds.

ISSN 1511-3701

e-ISSN 2231-8542

Article ID


Download Full Article PDF

Share this article

Recent Articles