Bond flows and liquidity: Do foreigners matter?

Bond Liquidity Premia

Recent models of limits to arbitrage imply that the tightness of funding conditions faced by financial intermediaries is a component of the pricing kernel. In the US, the repo market is the key funding market for traders and arbitrageurs implying in turn that the on-the-run premium shares a common component with the risk premia observed in other markets. This observation leads to the following ...

Latent Liquidity and Corporate Bond Yield Spreads

Recent research has shown that default risk accounts for only a part of the total yield spread on risky corporate bonds relative to their riskless benchmarks. One candidate for the unexplained portion of the spread is a premium for the illiquidity in the corporate bond market. We investigate this issue by relating the liquidity of corporate bonds, as measured by their ease of market access, to ...

Dark Chocolate and Metabolic Syndrome; Do Polyphenols All that Matter?

Determinants of Emerging Market Bond Spread: Do Economic Fundamentals Matter?

for their helpful comments and Carmini Michelitsh for providing spread data. 2 Summary In the 1990s, international bond issues by developing countries have surged dramatically and become one of the fastest growing devices of external development financing. Also, their terms have improved due to increased institutional investors interest in emerging market securities and better economic prospect...

Liquidity Risk Premia in Corporate Bond Markets∗

This paper explores the role of liquidity risk in the pricing of corporate bonds. We show that corporate bond returns have significant exposures to fluctuations in treasury bond liquidity and equity market liquidity. Further, this liquidity risk is a priced factor for the expected returns on corporate bonds, and the associated liquidity risk premia help to explain the credit spread puzzle. In t...