The Informational Efficiency of the Corporate Bond Market: An Intraday Analysis

Ronen, Tavy; Hotchkiss, Edith S.

doi:10.2139/ssrn.195248

Cited by 88 publications

(77 citation statements)

References 7 publications

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“…We further hypothesize that since lenders are exposed to downside losses, but do not share in upside gains (beyond the contractual repayment of interest and principal), it is conceivable that the loan market would be more sensitive to negative earnings information than to positive earnings 1 A noted exception to this general rule is Hanjinicolaou and Kalay (1984) that examines the impact of dividend announcements on public bondholder wealth. Hotchkiss and Ronen (2002) find that both equity and publicly-held bonds respond equally efficiently to information about earnings. 2 For a discussion of bank loans as privately placed debt, see Carey, Post and Sharpe (1998). information.…”

Section: Introductionmentioning

confidence: 88%

The Information Content of Quarterly Earnings in Syndicated Bank Loan Prices

Allen¹,

Guo²,

Weintrop³

2008

Asia-Pacific Journal of Accounting & Economics

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We examine the information content of quarterly earnings announcements in the syndicated bank loan market, a hybrid public/private debt market that is exclusively comprised of informed institutional participants. In contrast to the literature on equity price reactions to earnings announcements, we find that bank loan returns experience no significant response on earnings announcement dates. However, we do find significant price movements in the secondary loan market four weeks prior to earnings announcement dates, around the time of the monthly covenant reports to members of the syndicate. Moreover, we find that the information content in syndicated bank loan prices is most pronounced for borrowers with predominantly intangible assets that experience declining earnings. Thus, we find evidence that when earnings announcements convey relevant information about the borrowing firm (i.e., for informationally opaque firms with declining creditworthiness), the syndicated bank loan market expeditiously incorporates that information into prices. JEL Classifications: G14, M41

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Section: Introductionmentioning

confidence: 88%

The Information Content of Quarterly Earnings in Syndicated Bank Loan Prices

Allen¹,

Guo²,

Weintrop³

2008

Asia-Pacific Journal of Accounting & Economics

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“…Hotchkiss and Ronen (1999) and Alexander, Edwards, and Ferri (2000) use the Fixed Income Pricing System (FIPS) database of high-yield bonds, collected by the National Association of Securities Dealers (NASD) to study various aspects of corporate bond liquidity.…”

Section: Article In Pressmentioning

confidence: 99%

Latent liquidity: A new measure of liquidity, with an application to corporate bonds

Mahanti¹,

Nashikkar

Subrahmanyam

et al. 2008

Journal of Financial Economics

201

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We present a new measure of liquidity known as ''latent liquidity'' and apply it to a unique corporate bond database. Latent liquidity is defined as the weighted average turnover of investors who hold a bond, in which the weights are the fractional investor holdings. It can be used to measure liquidity in markets with sparse transactions data. For bonds that trade frequently, our measure has predictive power for both transaction costs and the price impact of trading, over and above trading activity and bond-specific characteristics thought to be related to liquidity. Additionally, this measure exhibits relationships with bond characteristics similar to those of other trade-based measures. r

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“…For non-financial securities, instead, three out of four liquidity measures suggest liquidity being higher on DomesticMOT than on EuroTLX. The Roll indicator is not significantly different across the two venues 26 . The time series evolution of the liquidity indicator is reported in Figure 6 (monthly average liquidity levels by venue and sector over the sample time period).…”

Section: The Liquidity Of Dual-listed Bonds Across Trading Venuesmentioning

confidence: 71%

“…Common factors such as firm specific news are expected to drive joint reactions of returns and volumes of bonds and stocks (Hotchkiss and Ronen, 2002;Hotchkiss and Jostova, 2007). De Jong and Driessen (2006) show that the liquidity of non-financial bond is related to the liquidity of government bonds.…”

Section: The Determinants Of Corporate Bond Liquidity: a Survey Of Thmentioning

confidence: 99%

The Liquidity of Dual-Listed Corporate Bonds. Empirical Evidence from Italian Markets

et al. 2014

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We compute some indicators (zero-trade, turnover ratio, Amihud price impact, and Roll bid-ask spread) to examine the liquidity conditions of corporate bonds traded on the main Italian retail bond markets from January 2010 to June 2013. In order to compare market liquidity for identical securities, our analysis focuses on fragmented bonds, i.e. bonds traded concurrently on two different venues: either DomesticMOT and EuroTLX, or ExtraMOT and EuroTLX. As for bonds traded on DomesticMOT and EuroTLX, the Amihud and the Roll statistics suggest EuroTLX being more liquid. Moreover, irrespective of the trading venue, on average bank bonds are less liquid than bonds issued by non-financial companies, especially from 2011 due to the impact of the sovereign debt crisis. With regard to bonds traded across ExtraMOT and EuroTLX, the latter is characterized by better liquidity conditions, with bank bonds being more liquid than non-financial ones. Furthermore, we find evidence of better liquidity figures for Italian bonds (nationality), structured bonds (complexity), and securities with greater minimum trading size (MTS). We also find that bonds' features (issuers' nationality and industry; bonds' residual maturity, complexity, rating, etc…) affect liquidity differently depending upon the trading venue, thus supporting the view that market microstructure may play a relevant role. Finally, we investigate the effect of fragmentation by comparing the liquidity of dual-listed bank bonds fragmented across DomesticMOT and EuroTLX with otherwise similar bank bonds traded exclusively on DomesticMOT. Italian fragmented bank bonds turn out to be slightly more liquid than similar Italian bonds traded exclusively on DomesticMOT; whereas, the opposite holds for foreign bank bonds. However, overall there is not a clear-cut evidence on the effect of fragmentation on bond liquidity, probably because it is intertwined with bonds' attributes, such as the issue size (in our sample, higher for the Italian bank bonds).JEL Classification: G01, G10, G12, G18

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The Informational Efficiency of the Corporate Bond Market: An Intraday Analysis

Cited by 88 publications

References 7 publications

The Information Content of Quarterly Earnings in Syndicated Bank Loan Prices

The Information Content of Quarterly Earnings in Syndicated Bank Loan Prices

Latent liquidity: A new measure of liquidity, with an application to corporate bonds

The Liquidity of Dual-Listed Corporate Bonds. Empirical Evidence from Italian Markets

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