This paper provides an empirical test of the demand side of Thakor's (1982) theory of bond insurance signaling, namely that the insurance premium charged by municipal bond insurers provides a signal to the market that reduces asymmetric information in the market. We test the theory for a sample...

This study examines the relationship between underwriter placement risk and market transaction prices using a sample of state general obligation bonds. We proxy underwriter placement risk using three variables: “when-issued” trades, underwriter syndicate size, and bond sale method....