|
Based on your IP address, your paper is being delivered by:
|
 |
 |
 |
 |
 |
New York, USA
Processing request.
|
Illinois, USA
Processing request.
|
Brussels, Belgium
Processing request.
|
Seoul, Korea
Processing request.
|
California, USA
Processing request.
|
If you have any problems downloading this paper,
please click on another Download Location above, or
File name: SSRN-id722646. ; Size: 351K
|
|
Corporate Yield Spreads and Bond Liquidity
David A. Lesmond
Tulane University - A.B. Freeman School of Business
Long Chen
Cheung Kong Graduate School of Business
Jason Zhanshun Wei
University of Toronto - Rotman School of Management
April 2005
Abstract:
We examine whether liquidity is priced in corporate yield spreads. Using a battery of liquidity measures covering over 4000 corporate bonds and spanning investment grade and speculative grade categories, we find that more illiquid bonds earn higher yield spreads; and that an improvement of liquidity causes a significant reduction in yield spreads. These results hold after controlling for common bond-specific, firm-specific, and macroeconomic variables, and are robust to issuers' fixed effect and potential endogeneity bias. Our finding mitigates the concern in the default risk literature that neither the level nor the dynamic of yield spreads can be fully explained by default risk determinants, and suggests that liquidity plays an important role in corporate bond valuation.
Number of Pages in PDF File: 42
working papers series
Download This Paper
Date posted: February 7, 2004
Suggested CitationLesmond, David A., Chen, Long and Wei, Jason Zhanshun, Corporate Yield Spreads and Bond Liquidity (April 2005). 14th Annual Conference on Financial Economics and Accounting. Available at SSRN: http://ssrn.com/abstract=495422 or http://dx.doi.org/10.2139/ssrn.495422
|
| Feedback to SSRN (Beta) |
|
|
|
|
|
|
