PRICE DISCOVERY IN INDONESIA GOVERNMENT BOND MARKET
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This study is try to conduct investigation about price discovery in Indonesia government bond market. Researchs and literatures in market microsttructure found that price discovery is very important to achieve return and manage risk because information is tied to price of the asset. Price discovery comprehension support investors to make better decision and more effiecient asset valuation with information. This research will cover two tier market, first tier is interdealer market and second tier is customer market. We study the dealer and customer order flow to identify which side that have greater impact in price formation in government bond market. Order flow are defined by number of trade in interdealer market and customer market. The data range is government bond transaction from year 2009 to 2014. In order to measure impact order flow to yield changes, we employ three group of maturity. Three type of yield changes bond we employ that is 3-year, 5-year- and 10-year Indonesia government securities. Three group of order flow we use to match the type of Indonesia government securities are short term-, medium-term and long-term order flow. We analyze the order flow impact with ordinary least square regression. Valseth (2012) found that aggregat interdealer flow has bigger explanatory power than aggregat customer order flow that consistent with Brand and Kavajecz (2004), Anand and Subramanyam (2008) and Osler, Ende Menkhoff (2011) that almost all research conducted in US and Europe market, so this study try to investigate in Indonesia as the emerging government bond market. So far the result is not in line with the developed countries government bond market. Except the mid term customer order flow.