Title
Market Accessibility, Corporate Bond ETFs, and Liquidity
Publication Date
11-30-2017
Abstract
We develop a stylized model that generates the following empirical predictions: the less (more) accessible the underlying market is ex ante, the more its liquidity improves (deteriorates) when basket trading becomes available. We empirically test these predictions using corporate bonds before and after the introduction of ETFs. Consistent with the model's prediction, liquidity improvement is larger for highly arbitraged, low-volume, and high-yield bonds, and for 144A bonds to which retail investor access is prohibited by law. Our paper leads to a more nuanced understanding of the impact of basket security introduction than previous research suggested.
Document Type
Article
Keywords
Market Accessibility, ETFs, Corporate Bonds, Liquidity
Disciplines
Finance
DOI
10.2139/ssrn.3083257
Source
SMU Cox: Finance (Topic)
Language
English