Is Post-Crisis Bond Liquidity Lower?

55 Pages Posted: 10 Apr 2017 Last revised: 19 Mar 2023

See all articles by Mike Anderson

Mike Anderson

Mike Anderson

René Stulz

Ohio State University (OSU) - Fisher College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: April 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.

Suggested Citation

Anderson, Mike and Stulz, René, Is Post-Crisis Bond Liquidity Lower? (April 2017). NBER Working Paper No. w23317, Available at SSRN:

Mike Anderson (Contact Author)

Mike Anderson ( email )

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

René Stulz

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

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