Municipal Bond Markets

41 Pages Posted: 31 Oct 2018 Last revised: 12 Nov 2018

See all articles by Dario Cestau

Dario Cestau

IE Business School, IE University

Burton Hollifield

Carnegie Mellon University - David A. Tepper School of Business

Dan Li

Federal Reserve Board

Norman Schürhoff

University of Lausanne; Swiss Finance Institute; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: October 31, 2018

Abstract

The effective functioning of the municipal bond market is crucial for the provision of public services, as it is the largest capital market for state and municipal issuers. Prior research has documented tax, credit, liquidity, and segmentation effects in municipal bonds. Recent regulatory initiatives to improve transparency have made granular trade data available to researchers, rendering it a natural laboratory to study financial intermediation, asset pricing in decentralized markets, and local public fi nance. Trade-by-trade studies have found large trading costs, contemporaneous price dispersion and other deviations from the law-of-one-price. More research is required to understand optimal market design and the impact of post-crisis regulation, sustainability, and financial technology.

Keywords: municipal bonds, muni-bond puzzle, over-the-counter markets, trading cost, centrality premium, electroni cation, green bonds

JEL Classification: G12, G14, G18, G24, G28, H21, H6, H7

Suggested Citation

Cestau, Dario and Hollifield, Burton and Li, Dan and Schürhoff, Norman, Municipal Bond Markets (October 31, 2018). Swiss Finance Institute Research Paper No. 18-69. Available at SSRN: https://ssrn.com/abstract=3275950 or http://dx.doi.org/10.2139/ssrn.3275950

Dario Cestau

IE Business School, IE University ( email )

Calle Maria de Molina 12, Bajo
Madrid, Madrid 28006
Spain

Burton Hollifield

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
(412) 268-6505 (Phone)
(412) 268-6837 (Fax)

Dan Li

Federal Reserve Board ( email )

20th and C Streets, NW
Mail Stop 89
Washington, DC 20551
United States

Norman Schürhoff (Contact Author)

University of Lausanne ( email )

Extranef 228
CH-1015 Lausanne
Switzerland
+41 (0)21 692 3447 (Phone)
+41 (0)21 692 3435 (Fax)

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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