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An Asset Pricing Approach to Liquidity Effects in Corporate Bond Markets
| Content Provider | Semantic Scholar |
|---|---|
| Author | Bongaerts, Dion Jong, Frank De Driessen, Joost |
| Copyright Year | 2017 |
| Abstract | We use an asset pricing approach to compare the effects of expected liquidity and liquidity risk on expected U.S. corporate bond returns. Liquidity measures are constructed for bond portfolios using a Bayesian approach to estimate Roll’s measure. The results show that expected bond liquidity and exposure to equity market liquidity risk affect expected bond returns, and that these liquidity effects explain a substantial part of the credit spread puzzle. In contrast, we find robust evidence that exposure to corporate bond liquidity shocks carries an economically negligible risk premium. We develop a simple theoretical model that can explain this finding. |
| Starting Page | 1229 |
| Ending Page | 1269 |
| Page Count | 41 |
| File Format | PDF HTM / HTML |
| DOI | 10.1093/rfs/hhx005 |
| Volume Number | 30 |
| Alternate Webpage(s) | https://4nations.org/papers/bongaertsdejongdriessen12.pdf |
| Alternate Webpage(s) | https://www.uis.no/getfile.php/1342499/Conferences/CBWMFM%202011/Bongaerts_deJong_Driessen.pdf |
| Alternate Webpage(s) | http://www.garp.org/media/885799/corpbondliquidityseptember_v4.pdf |
| Alternate Webpage(s) | https://doi.org/10.1093/rfs%2Fhhx005 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
