This paper examines how liquidity and investors' heterogeneous liquidity preferences interact toaffect asset pricing. Using data on insurers' corporate bond holdings, we find that the illiquidity ofcorporate bond portfolios varies widely and persistently across insurers, and is related to...

Insurance firms are a key player in the corporate bond market. In this study, we consider the role of life insurers as "rainy day" liquidity providers who improve liquidity in stressful conditions due to the nature of long-term buy-and-hold investments. To this end, we present evidence that...

We construct a theoretical framework to investigate the impact of liquidity risk, in the secondary corporate debt market, on corporate risk-taking preferences. Using closed-form solutions, our model shows that equity holders choose to adopt high-risk projects upon the arrival of illiquidity...

We investigate liquidity shocks and shocks to fundamentals during financial crises at commercial banks, investment banks, and hedge funds. Liquidity shock amplification models assume that widespread funding problems cause fire sales. We find that most banks do not experience funding declines...

Larger bonds offer greater liquidity, which should reduce their yields. A simple way for firms to reduce financing costs is to sell bonds with large face values. We find that mega-bonds are more liquid than smaller bonds. However, offering yield spreads on mega-bonds are not lower and are higher...

We investigate two competing explanations for commercial bank distress during financial crises: liquidity shortages and solvency concerns. If liquidity shortages cause distress, a lender of last resort can help by providing funds to banks having trouble rolling over short-term debt and facing...