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Illiquidity or credit deterioration: A study of liquidity in the US corporate bond market during financial crises

Friewald, Nils and Jankowitsch, Rainer and Subrahmanyam, Marti G. (2012) Illiquidity or credit deterioration: A study of liquidity in the US corporate bond market during financial crises. Journal of Financial Economics, 105 (1). pp. 18-36. ISSN 0304-405X

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Abstract

We analyze whether liquidity is an important price factor in the US corporate bond market. In particular, we focus on whether liquidity effects are more pronounced in periods of financial crises, and especially, for bonds with high credit risk. We use a unique data set covering more than 20,000 bonds, between October 2004 and December 2008. We employ a wide range of liquidity measures and and that liquidity effects account for approximately 14% of the explained market-wide corporate yield spread changes. Moreover, we find that the economic impact of the liquidity measures is significantly larger in periods of crisis and for speculative grade bonds. (authors' abstract)

Item Type: Article
Additional Information: This is an article in press that has been peer reviewed and accepted for publication by the Editorial Board of the Journal of Financial Economics. Access to this version may require a subscription.
Keywords: liquidity / corporate bonds / financial crisis / OTC markets
Classification Codes: JEL G01, G12, G14
Divisions: Departments > Finance, Accounting and Statistics > Finance, Banking and Insurance
Version of the Document: Accepted for Publication
Variance from Published Version: Minor
Depositing User: Dissertation Administrator
Date Deposited: 28 Mar 2012 15:36
Last Modified: 10 Nov 2014 19:36
Related URLs:
FIDES Link: http://bach.wu.ac.at/bachapp/cgi-bin/fides/fides.a...
URI: http://epub.wu.ac.at/id/eprint/3483

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