Illiquidity or credit deterioration: A study of liquidity in the US corporate bond market during financial crises

Friewald, Nils; Jankowitsch, Rainer; Subrahmanyam, Marti G.

doi:10.1016/j.jfineco.2012.02.001

Cited by 352 publications

(136 citation statements)

References 36 publications

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“…In this section, we show that our results are not driven by the crisis period. To do so, we follow Dick‐Nielsen, Feldhütter, and Lando (), Friewald, Jankowitsch, and Subrahmanyam (), and Bao, O'Hara, and Zhou () in defining the period between July 2007 and April 2009 as the crisis period. We then exclude observations from this period and rerun the full regression model in equation .…”

Section: Systematic Otc Frictions and Yield Spread Changesmentioning

confidence: 99%

Over‐the‐Counter Market Frictions and Yield Spread Changes

Friewald¹,

Nagler²

2019

The Journal of Finance

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We empirically study whether systematic over‐the‐counter (OTC) market frictions drive the large unexplained common factor in yield spread changes. Using transaction data on U.S. corporate bonds, we find that marketwide inventory, search, and bargaining frictions explain 23.4% of the variation in the common component. Systematic OTC frictions thus substantially improve the explanatory power of yield spread changes and account for one‐third of their total explained variation. Search and bargaining frictions combined explain more in the common dynamics of yield spread changes than inventory frictions. Our findings support the implications of leading theories of intermediation frictions in OTC markets.

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Section: Systematic Otc Frictions and Yield Spread Changesmentioning

confidence: 99%

Over‐the‐Counter Market Frictions and Yield Spread Changes

Friewald¹,

Nagler²

2019

The Journal of Finance

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“…The liquidity of the corporate bond market has attracted substantial attention from practitioners, regulators, and academics in recent years. The financial crisis of 2007 to 2009 saw the broad deterioration of liquidity in both equity (e.g., Anand, Irvine, Puckett, and Venkataraman ()) and corporate bond (e.g., Dick‐Nielsen, Feldhutter, and Lando (), Friewald, Jankowitsch, and Subrahmanyam, ()) markets. However, while equity market liquidity recovered after the financial crisis (Anand et al.…”

mentioning

confidence: 99%

Capital Commitment and Illiquidity in Corporate Bonds

Bessembinder¹,

Jacobsen

Maxwell

et al. 2018

The Journal of Finance

292

120

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We study trading costs and dealer behavior in U.S. corporate bond markets from 2006 to 2016. Despite a temporary spike during the financial crisis, average trade execution costs have not increased notably over time. However, dealer capital commitment, turnover, block trade frequency, and average trade size decreased during the financial crisis and thereafter. These declines are attributable to bank‐affiliated dealers, as nonbank dealers have increased their market commitment. Our evidence indicates that liquidity provision in the corporate bond markets is evolving away from the commitment of bank‐affiliated dealer capital to absorb customer imbalances, and that postcrisis banking regulations likely contribute.

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“…Both Dick-Nielsen et al (2012) and Friewald et al (2012) show that corporate bond spreads widened dramatically during the financial crisis relative to pre-crisis levels. After controlling for credit risk, both studies find that a substantial portion of the…”

Section: Ijmf 112mentioning

confidence: 99%

The Global Financial Crisis: what have we learned so far?

Neuhauser

2015

International Journal of Managerial Finance

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to provide a cohesive review of the major findings in the literature concerning the Global Financial Crisis. Design/methodology/approach -Papers published in top-rated finance and economics journal since the crisis up to the present were reviewed. A large number of these were selected for inclusion, primarily based on the number of citations they had received adjusted for the amount of time elapsed since their publication, but also partly based on how well they fit in with the narrative. Findings -Much has been done to investigate the causes of the Global Financial Crisis, its effects on various aspects of the financial system, and the effectiveness of regulatory measures undertaken to restore the financial system. While more remains to be done, the existing body of research paints an interesting picture of what happened and why it happened, describes the interrelationships between the mortgage markets and financial markets created by the large scale securitization of financial assets, identifies the problems created by these inter-linkages and offers possible solutions, and assesses the effectiveness of the regulatory response to the crisis. Originality/value -This study summarizes a vast amount of literature using a framework that allows the reader to quickly absorb a large amount of information as well as identify specific works that they may wish to examine more closely. By providing a picture of what has been done, it may also assist the reader in identifying areas that should be the subject of future research.

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Illiquidity or credit deterioration: A study of liquidity in the US corporate bond market during financial crises

Cited by 352 publications

References 36 publications

Over‐the‐Counter Market Frictions and Yield Spread Changes

Over‐the‐Counter Market Frictions and Yield Spread Changes

Capital Commitment and Illiquidity in Corporate Bonds

The Global Financial Crisis: what have we learned so far?

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