Abstract
This paper analyzes the liquidity of the fixed-income market in Japan based on the noise measure proposed by Hu, Pan, and Wang (2013). We show this measure can capture the illiquidity in the Japanese market, especially during the liquidity crisis of 2008–2009. We also demonstrate that this measure can track the commonality of liquidity in the international capital market, especially after the financial crisis. Moreover, we show that this measure can track the degree of the limits to the arbitrage in the light of the risk aversion.
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