I model how corporate bond prices are affected by search frictions and occasional selling pressures and test my predictions empirically. A key prediction is that in a distressed market with more sellers than buyers, prices paid by large traders decrease more than those of small traders. Using a...

We document cross-sectional variation in bid-ask spreads in the U.S. corporate bond market and use the variation to test OTC theories of the bid-ask spread. Bid-ask spreads, measured by realized transaction costs, increase with maturity for investment grade but not for speculative grade bonds....

We analyze liquidity components of corporate bond spreads during 2005–2009 using a new robust illiquidity measure. The spread contribution from illiquidity increases dramatically with the onset of the subprime crisis. The increase is slow and persistent for investment grade bonds while the...