Is Post-Crisis Bond Liquidity Lower?

Fisher College of Business Working Paper No. 2017-03-009

Charles A. Dice Center Working Paper No. 2017-09

55 Pages Posted: 31 Mar 2017 Last revised: 22 Apr 2017

See all articles by Mike Anderson

Mike Anderson

Mike Anderson

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: Aprl 21, 2017


Price-based liquidity metrics are better in 2013-2014 for small trades and large high-yield bond trades, but not for large investment grade bond trades, relative to before the crisis, and are better for all bond types and trade sizes relative to 2010-2012. This evidence contrasts with the widely-held view among practitioners that liquidity has worsened. However, turnover falls sharply after the crisis compared to before the crisis, which is consistent with investors having more difficulty completing trades on acceptable terms and supports the practitioner view. A frequent concern is that post-crisis liquidity could be low when markets are stressed. We consider three stress events: extreme VIX increases, extreme bond yield increases, and downgrades to high yield. We find evidence that liquidity is lower after the crisis for extreme VIX increases. However, we find no evidence that liquidity is worse for idiosyncratic stress events after the crisis than before the crisis. Our results emphasize the importance of considering how liquidity reacts to shocks which can affect financial stability and of taking into account the information from non-price liquidity metrics.

Keywords: Bond liquidity, Basel III, regulation, price pressure, bond turnover, bond effective spread

JEL Classification: G12,G18,G28

Suggested Citation

Anderson, Mike and Stulz, Rene M., Is Post-Crisis Bond Liquidity Lower? (Aprl 21, 2017). Fisher College of Business Working Paper No. 2017-03-009, Charles A. Dice Center Working Paper No. 2017-09, Available at SSRN: or

Mike Anderson

Mike Anderson ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States


National Bureau of Economic Research (NBER)

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European Corporate Governance Institute (ECGI)

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