Liquidity, Labels, and Medium-Term Notes

32 Pages Posted: 21 Mar 2001

See all articles by Donald J. Mullineaux

Donald J. Mullineaux

University of Kentucky - Gatton College of Business and Economics

Ivan C. Roten

Appalachian State University - John A. Walker College of Business

Date Written: January 2001

Abstract

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

Mullineaux, Donald J. and Roten, Ivan C., Liquidity, Labels, and Medium-Term Notes (January 2001). Available at SSRN: https://ssrn.com/abstract=261734 or http://dx.doi.org/10.2139/ssrn.261734

Donald J. Mullineaux (Contact Author)

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States
859-257-2890 (Phone)
859-257-9688 (Fax)

Ivan C. Roten

Appalachian State University - John A. Walker College of Business ( email )

Department of Finance, Banking, and Insurance 3066 Raley Hall
Boone, NC 28608
United States
828.262.6943 (Phone)
828.262.6612 (Fax)

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