Unpublished conference/Abstract (Scientific congresses and symposiums)
Liquidity patterns on the US corporate bond market
Heck, Stéphanie; Margaritis, Dimitri; Muller, Aline
2014World Finance and Banking Symposium
 

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Keywords :
idiosyncratic liquidity; corporate bonds; yield spreads; global financial crisis
Abstract :
[en] Liquidity commonality exists and empirical evidence (e.g. Lin et al., 2011) indicates that exposure to this common liquidity factor is priced in the cross-section of corporate bonds. The existence of commonality implies that part of a bond’s illiquidity is left as idiosyncratic. In this paper, we study how illiquidity components explain the cross-section of bond yields and how this relationship varies over time and across bond categories. We use a factor decomposition to break down total illiquidity into a common and an idiosyncratic component and analyze how yields relate differentially to each of these two components. We find that a bond’s idiosyncratic illiquidity is important, which might reflect informational asymmetries compounded by the lack of diversification in the institutional investors’ portfolios. Moreover, the relation between illiquidity and yield spreads appears to be negative during the recent crisis period.
Disciplines :
Finance
Author, co-author :
Heck, Stéphanie ;  Université de Liège - ULiège > HEC-Ecole de gestion : UER > Finance
Margaritis, Dimitri
Muller, Aline ;  Université de Liège - ULiège > HEC-Ecole de gestion : UER > Finance
Language :
English
Title :
Liquidity patterns on the US corporate bond market
Publication date :
13 December 2014
Event name :
World Finance and Banking Symposium
Event organizer :
Nanyang Business School
Event place :
Singapore, Singapore
Event date :
from 12-12-2014 to 13-12-2014
Audience :
International
Funders :
ULiège ARD - Université de Liège. Administration Recherche et Développement [BE]
F.R.S.-FNRS - Fonds de la Recherche Scientifique [BE]
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since 10 February 2015

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