We study the exposure of the U.S. corporate bond returns to liquidity shocks of stocks and treasury bonds over the … period 1973-2007 in a regime switching model. In one regime, liquidity shocks have mostly insignificant effect on bond prices … default), suggest the existence of time-varying liquidity risk of corporate bond returns conditional on episodes of flight to …

marketplace such as a supermarket or a stock exchange with adequate liquidity. Further, people must have confidence that such a … well-functioning marketplace will also exist in the future. Market liquidity risk is the risk that the market will function … effects of market liquidity risk on asset pricing, investment management, corporate finance, banking, financial crises …

"We study the exposure of the U.S. corporate bond returns to liquidity shocks of stocks and treasury bonds over the … period 1973 to 2007. A decline in liquidity of stocks or Treasury bonds produces conflicting effects: Prices of investment … default). Our findings suggest the existence of time-varying liquidity risk of corporate bond returns and episodes of flight …