Abstract

http://ssrn.com/abstract=982654
 
 

Citations



 


 



Corporate Bond Market Transaction Costs and Transparency


Amy K. Edwards


Securities and Exchange Commission (SEC)

Lawrence Harris


University of Southern California - Marshall School of Business - Finance and Business Economics Department

Michael S. Piwowar


Government of the United States of America - Banking Committee


Journal of Finance, Vol. 62, No. 3, June 2007

Abstract:     
Using a complete record of U.S. over-the-counter (OTC) secondary trades in corporate bonds, we estimate average transaction costs as a function of trade size for each bond that traded more than nine times between January 2003 and January 2005. We find that transaction costs decrease significantly with trade size. Highly rated bonds, recently issued bonds, and bonds close to maturity have lower transaction costs than do other bonds. Costs are lower for bonds with transparent trade prices, and they drop when the TRACE system starts to publicly disseminate their prices. The results suggest that public traders benefit significantly from price transparency.

Keywords: Corporate bonds, fixed income, liquidity, transaction cost measurement, effective spreads, TRACE, price transparency, market microstructure, dealers

JEL Classification: G14, G18, G24

Accepted Paper Series





Not Available For Download

Date posted: December 27, 2007  

Suggested Citation

Edwards, Amy K. and Harris, Lawrence and Piwowar, Michael S., Corporate Bond Market Transaction Costs and Transparency. Journal of Finance, Vol. 62, No. 3, June 2007. Available at SSRN: http://ssrn.com/abstract=982654

Contact Information

Amy K. Edwards (Contact Author)
Securities and Exchange Commission (SEC) ( email )
100 F St NE
Washington, DC 20549-1105
United States
202-551-6663 (Phone)
Lawrence Harris
University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
213-740-6496 (Phone)
213-740-6650 (Fax)
Michael S. Piwowar
Government of the United States of America - Banking Committee ( email )
Washington, DC
United States
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