Corporate yield spreads and bond liquidity

被引:517
作者
Chen, Long [1 ]
Lesmond, David A.
Wei, Jason
机构
[1] Michigan State Univ, E Lansing, MI 48824 USA
[2] Tulane Univ, New Orleans, LA 70118 USA
[3] Univ Toronto, Toronto, ON, Canada
关键词
RISK; MARKET; PRICE; RETURNS; STOCKS; DEBT;
D O I
10.1111/j.1540-6261.2007.01203.x
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
We find that liquidity is priced in corporate yield spreads. Using a battery of liquidity measures covering over 4,000 corporate bonds and spanning both investment grade and speculative categories, we find that more illiquid bonds earn higher yield spreads, and an improvement in liquidity causes a significant reduction in yield spreads. These results hold after controlling for common bond-specific, firm-specific, and macroeconomic variables, and are robust to issuers' fixed effect and potential endogeneity bias. Our findings justify the concern in the default risk literature that neither the level nor the dynamic of yield spreads can be fully explained by default risk determinants.
引用
收藏
页码:119 / 149
页数:31
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