Research Summary
Research Summary
Characteristics of Corporate Bond Transactions: Evolution Through Time and Across Liquidity (with George Chacko, Marti Subrahmanyam, and Jeffrey Sutthoff)
Description
The US corporate bond market is one of the most opaque, illiquid markets for corporate securities. Large, comprehensive bond databases are scarce, making it difficult to formally study and understand bond trading behavior. In this paper, we use a unique database of corporate bond transactions and holdings to explore the composition of traded bonds through time and across various measures of liquidity. In the time series analysis, we find strong evidence supporting the view that bond market liquidity has been increasing over time. As the time period progresses from 1994 to 2004, issue level trade count and daily trading volume become larger while days between trades and transaction sizes become smaller. Over the same time period, the typical traded bond has been shorter in maturity, older in age, lower in credit, and tends to be from an overall larger issue. In our cross sectional liquidity analysis, we find that more liquid bonds tend to be longer in maturity, younger in age, lower in credit, and tend to be from an overall larger issue.