|
|
|
|
||||
|
||||
An Asset Pricing Approach to Liquidity Effects in Corporate Bond MarketsDion BongaertsErasmus University Rotterdam (EUR) - Finance Frank De JongTilburg University - Department of Finance Joost DriessenTilburg University - Department of Finance; CentER Tilburg University March 1, 2012 Netspar Discussion Paper No. 03/2012-017 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.
Number of Pages in PDF File: 66 Keywords: Liquidity premium, liquidity risk, corporate bonds, credit spread puzzle JEL Classification: C51, G12, G13 working papers seriesDate posted: May 25, 2012Suggested CitationContact Information
|
|
|||||||||||||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo8 in 1.141 seconds
