Traditional liquidity measures can provide a false impression of the liquidity and stability of financial market trading. Using data on auctions (bids wanted in competition; BWICs) from the collateralized loan obligation (CLO) market, we show that a standard measure of liquidity, the effective...

We examine the system-wide effects of liquidity regulation on banks’ balance sheets. In the general equilibrium model, banks have to hold liquid assets, and choose among illiquid assets varying in the extent to which they are difficult to value before maturity, e.g., structured securities. By...

This paper examines the role of bond ratings and the effects of rating-based regulations in thecorporate bond market. Exploiting an unanticipated mechanical change in how the benchmarkLehman bond indices are constructed in 2005, we show that rating-induced market segmentationof the bond market...

Municipal bonds trade in opaque, decentralized broker-dealer markets in which price information is costly to gather. Whether dealers in such a market operate competitively is an empirical issue, but a difficult one to study. Data in such markets is generally not centrally recorded. We analyze a...