Liquidity Patterns in the U.S. Corporate Bond Market

Liquidity Patterns in the U.S. Corporate Bond Market
Author: Stephanie Heck
Publisher:
Total Pages: 36
Release: 2018
Genre:
ISBN:


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Liquidity level and liquidity risk are priced in the cross-section of corporate bond yields and returns. In the first case the focus is on the individual liquidity level while in the second case it is on the exposure to a common liquidity factor. In this paper we focus on the impact of the liquidity level on yield spreads by acknowledging that liquidity is a latent variable with an important fraction of commonality. We first document the extent of this commonality in the US corporate bond market. Second we assess whether the relation to yield spreads is driven by this commonality or by the remaining idiosyncratic part. We find that a large fraction of the liquidity effect in fact stems from liquidity commonality. The impact of the bond-specific idiosyncratic liquidity level is minor overall, but increases in the post-crisis period and for some bond categories.


Liquidity Patterns in the U.S. Corporate Bond Market
Language: en
Pages: 36
Authors: Stephanie Heck
Categories:
Type: BOOK - Published: 2018 - Publisher:

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Liquidity level and liquidity risk are priced in the cross-section of corporate bond yields and returns. In the first case the focus is on the individual liquid
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