News and Corporate Bond Liquidity

53 Pages Posted: 18 May 2014 Last revised: 26 Mar 2015

See all articles by Hao Jiang

Hao Jiang

Michigan State University

Zheng Sun

University of California, Irvine - Paul Merage School of Business

Date Written: March 2015

Abstract

Both macroeconomic and firm-specific news contain value-relevant information for corporate bonds. In this article, we show that trading volume in corporate bonds spikes before the release of scheduled macroeconomic news but on the days with and after scheduled firm-specific news. Since investors are less likely to be concerned with asymmetric information about macroeconomic than firm-specific news to be released, this result suggests that the anticipated arrival of macroeconomic news promotes speculative trades, whereas the arrival of firm-specific news encourages liquidity trades. Turning to liquidity, we find evidence of reduced informed trading and increased corporate bond liquidity on days with firm-specific news, but not on days with macroeconomic news.

Keywords: Corporate Bonds; News; Information Asymmetry; Liquidity; Yields; Bond Return

JEL Classification: G12

Suggested Citation

Jiang, Hao and Sun, Zheng, News and Corporate Bond Liquidity (March 2015). Available at SSRN: https://ssrn.com/abstract=2437975 or http://dx.doi.org/10.2139/ssrn.2437975

Hao Jiang

Michigan State University ( email )

315 Eppley Center
Department of Finance
East Lansing, MI 48824
United States

HOME PAGE: http://sites.google.com/site/haojiangfinance/

Zheng Sun (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States

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