Arbeitspapier

Lighting up the dark: Liquidity in the German corporate bond market

We study the impact of transparency on liquidity in OTC markets. We do so by providing an analysis of liquidity in a corporate bond market without trade transparency (Germany), and comparing our findings to a market with full post-trade disclosure (the U.S.). We employ a unique regulatory dataset of transactions of German financial institutions from 2008 until 2014 to find that: First, overall trading activity is much lower in the German market than in the U.S. Second, similar to the U.S., the determinants of German corporate bond liquidity are in line with search theories of OTC markets. Third, surprisingly, frequently traded German bonds have transaction costs that are 39-61 bp lower than a matched sample of bonds in the U.S. Our results support the notion that, while market liquidity is generally higher in transparent markets, a sub-set of bonds could be more liquid in more opaque markets because of investors "crowding" their demand into a small number of more actively traded securities.

Language
Englisch

Bibliographic citation
Series: SAFE Working Paper ; No. 230

Classification
Wirtschaft
International Financial Markets
Subject
Corporate Bonds
WpHG
Liquidity
Transparency
OTC markets

Event
Geistige Schöpfung
(who)
Gündüz, Yalin
Ottonello, Giorgio
Pelizzon, Loriana
Schneider, Michael
Subrahmanyam, Marti G.
Event
Veröffentlichung
(who)
Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
(where)
Frankfurt a. M.
(when)
2018

DOI
doi:10.2139/ssrn.3253000
Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Gündüz, Yalin
  • Ottonello, Giorgio
  • Pelizzon, Loriana
  • Schneider, Michael
  • Subrahmanyam, Marti G.
  • Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe

Time of origin

  • 2018

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