Is There a Clientele Effect in Islamic Bonds? Evidence from the Malaysian Sovereign Bond Market

Chen, Minxia; Cherian, Joseph; Li, Ziyun; Shao, Yuping; Subrahmanyam, Marti G.

doi:10.2139/ssrn.3198506

Cited by 2 publications

(1 citation statement)

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“…They found that bonds with low liquidity attract mostly investors who prefer illiquidity. On the liquidity of conventional and Islamic sovereign bonds in the Malaysian market, Chen et al (2018) found no significant difference between the two. However, government-issued sukuk produces higher yield relative to its conventional counterpart.…”

Section: Introductionmentioning

confidence: 80%

A Drivers of Islamic Bond Liquidity in Malaysia: Latent Liquidity Approach

Said¹,

Suhaimi²,

Rahim³

et al. 2018

IJEF

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A steady liquidity level is an importance characteristic of a financial market, especially after the 2008 financial crisis. The Islamic financial market was virtually isolated from the crisis. It is interesting to explore the underlying determinants that stabilise a market’s liquidity level. This paper studies the determinants of a Sukuk’s liquidity level in the Malaysian bond market using a new liquidity measure known as latent liquidity. The measure does not require transaction data, which makes it applicable to an illiquid market such as the Malaysian bond market. Utilising data from the Malaysian bond market, the paper involves two steps of data analyses, namely an insight into the trend and the liquidity level of the Sukuk market. It then continues to investigate the driver of Sukuk’s liquidity using the latent liquidity as a proxy against five Sukuk characteristics in a random effect regression model. Four variables issuance amount, maturity, coupon rate, and age are found to be significant drivers of Sukuk’s liquidity level. Conclusions drawn from the regression results indicate Sukuk’s investors’ preference in matching long term Sukuk with their long term liabilities, in addition to their fondness for keeping their Sukuk to amortise the return.

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Section: Introductionmentioning

confidence: 80%