Liquidity, Labels, and Medium-Term Notes
32 Pages Posted: 21 Mar 2001
Date Written: January 2001
We suggest that the medium-term note market provides an excellent laboratory for exploring the relationships between yield, liquidity, and the label affixed to a financial instrument. Crabbe and Turner (1995) examined the liquidity issue and uncovered the counter-intuitive result that issue size is unrelated to liquidity. Their study failed to examine a potential channel for a liquidity effect, however, in the form of multiple issues from a single, typically large, MTN registration filing. We find evidence that file size is significantly related to yield in a number of instances. Several other proxies for liquidity, such as frequency of issue, are also sometimes significantly related to yields. Contrary to Crabbe and Turner (1995), we find that labeling a security an MTN can have an impact on its yield. The label "note" also appears to matter for yield in some instances.
Keywords: Liquidity, medium-term notes, yield
JEL Classification: G10
Suggested Citation: Suggested Citation