The Influential Factors of Trading Volume in Taiwan Government Bond Market

We examine the determinants of trading volume in Taiwan government bond market. In order to study the characteristics of liquidity, we use stock volume, repo rate, term spreads, default spreads, price volatility and market return as the explanatory variables. Furthermore, we analyze the determinants across different classification in on-the-run or off-the-run securities, remaining-time-to-maturity and financial crisis period. We find a negative relation between stock volume and bond volume and a positive relation between volatility and volume, so does market return and default spreads. As for repo rate, we find a negative relation with volume and stronger in long-term bonds. Finally, the relations are much stronger in off-the-run securities.