Do smaller, less liquid markets help predict prices in more liquid related markets? Using TRACE data for 2002-08 for 1,167 bonds issued by 442 firms, we find that a decline of 10% over three months of a firm's bonds is associated with an ensuing decline of 3% to 6% in its stock. Bond price...

Do smaller, less liquid markets help predict prices in more liquid related markets? Using TRACE bond trade data for 1,958 bonds issued by 663 firms, we find that a decline of 10% in a firm's bonds over one month is associated with a decline of 2.1% in its stock the following month. The...