Financial system

Philosophy

Liquidity risk

Yield (engineering)

Actuarial science

Metallurgy

Materials science

Accounting liquidity

Economics

Market liquidity

Business

Monetary economics

Epistemology

Econometrics

Credit spread (options)

Financial economics

Liquidity premium

Bond

Finance

Explanatory power

Credit risk

Liquidity crisis

Finance research letters

This study analyses how liquidity risk affects bonds’ yield spreads after controlling for credit risk, bond-specific characteristics and macroeconomic variables. Using two liquidity estimates, LOT liquidity and the bid-ask spread, we find that, in particular, the LOT liquidity measure has explanatory power for the yield spread of green bonds. Overall, however, the impact of LOT decreases over time, implying that, nowadays liquidity risk is negligible for green bonds.

The impact of liquidity risk on the yield spread of green bonds