Carnegie Mellon University
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Essays on the Liquidity of Financial Markets

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posted on 2021-11-05, 16:56 authored by Jackson PfeifferJackson Pfeiffer
Liquidity is a central feature in the research of financial markets. Broadly speaking, liquidity describes the ease with which an asset can be traded both quickly and without
deviating much from the current market price. In this collection of essays, I investigate three aspects of liquidity – one affecting stocks in the context of a limit order book
market, and two in the context of the over-the-counter market governing U.S. corporate bonds. In the first essay, measuring liquidity as the depth of the limit order book at
price levels extending from the mid-quote price, I explore the implications of private information which can be drawn from the dynamic levels of liquidity in the order book. In the second essay, measuring illiquidity as the effective bid-ask spread, I create an estimate for the aggregate illiquidity of the broader over-the-counter market for U.S. corporate bonds from the observed illiquidity of bonds that are traded. In the third essay, measuring liquidity as the market’s ability to absorb the large demand to sell bonds resulting from a fire sale, I observe the unintended impacts that Dodd-Frank
regulations have on bond market liquidity and the indirect effects they have on the cost of capital faced by corporations when raising debt in the bond market.




Degree Type

  • Dissertation


  • Tepper School of Business

Degree Name

  • Doctor of Philosophy (PhD)


Burton Hollifield

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