Flighty liquidity

Arbeitspapier

We study the conditional distribution of future liquidity in the secondary market for corporate bonds as a function of current liquidity. Increases in liquidity are persistent for investment-grade bonds and flighty for high-yield bonds. Greater liquidity of high-yield bonds is associated with lower uncertainty about future liquidity of investment-grade bonds, but greater liquidity of investment-grade bonds is associated with greater uncertainty about future liquidity of high-yield bonds. Finally, we show that measures of market-wide volatility and market-maker constraints do not contain information useful for predicting the distribution of future liquidity over and above that contained in the recent history of bid-ask spreads.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 870

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Asset Pricing; Trading Volume; Bond Interest Rates ; Financial Forecasting and Simulation
• Subject: corporate bond liquidity ; liquidity uncertainty ; quantile regressions

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Boyarchenko, Nina ; Giannone, Domenico ; Shachar, Or
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/210722
• Last update: 10.03.2025, 11:43 AM CET