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The misalignment between corporate bond and credit default swap (CDS) spreads (i.e., CDSbond basis) during the 2007-09 financial crisis is often attributed to corporate bond dealers shedding off their inventory, right when liquidity was scarce. This paper documents evidence against this...
Persistent link: https://www.econbiz.de/10010202650
This paper examines market liquidity in the post-crisis era in light of concerns that regulatory changes might have reduced dealers' ability and willingness to make markets. We begin with a discussion of the broader trading environment, including an overview of regulations and their potential...
Persistent link: https://www.econbiz.de/10011547707
We examine liquidity creation per unit of assets by banks subject to the Liquidity Coverage Ratio (LCR) using the liquidity measures Liquidity Mismatch Index (LMI) (Bai et al., 2018) and BB (Berger and Bouwman, 2009). We identify the LCR effects through time and cross-section effects, specific...
Persistent link: https://www.econbiz.de/10011868438
Persistent link: https://www.econbiz.de/10011735065
At the onset of the COVID-19 pandemic, state and local governments were among the sectors expected to experience the most severe distress. The combination of a sharply deteriorating revenue picture, a pressing need for additional expenditures, delays in the receipt of substantial taxes owed, and...
Persistent link: https://www.econbiz.de/10012625894
We estimate the option value of municipal liquidity by studying bond market activity and public sector hiring decisions when government budgets are severely distressed. Using a regression discontinuity (RD) design, we exploit lending eligibility population cutoffs introduced by the federal...
Persistent link: https://www.econbiz.de/10012660369
We investigate the trading of corporate bonds on alternative trading system (ATS) platforms. We draw a key distinction between request-for-quote (RFQ) and electronic communication network (ECN) trading protocols, which balance investors' preference for immediacy and anonymity. Trades on ATS...
Persistent link: https://www.econbiz.de/10012257056
We introduce a new jackknife variance estimator for panel-data regressions. Our variance estimator can be motivated as the conventional leave-one-out jackknife variance estimator on a transformed space of the regressors and residuals using orthonormal trigonometric basis functions. We prove the...
Persistent link: https://www.econbiz.de/10015189307
The low-frequency movements of many economic variables play a prominent role in policy analysis and decision-making. We develop a robust estimation approach for these slow-moving trend processes, which is guided by a judicious choice of priors and is characterized by sparsity. We present some...
Persistent link: https://www.econbiz.de/10014302771
Beta-sorted portfolios - portfolios comprised of assets with similar covariation to selected risk factors - are a popular tool in empirical finance to analyze models of (conditional) expected returns. Despite their widespread use, little is known of their statistical properties in contrast to...
Persistent link: https://www.econbiz.de/10014480362