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Liquidity, Credit Risk And Pricing Of Corporate Bond, Xiaoli Sun

Dissertations and Theses Collection (Open Access)

Employing a comprehensive database on transactions of corporate bonds issued by corporations, agencies and financial institutions, we compare the different liquidity measures--bid-ask spread, zero-return percentage, Amihud illiquidity factor for the corporate bond market. The criteria of judging is based on the explanatory power of different liquidity measures in determining yield spread over the benchmark curve (equivalent-maturity Treasury bond or notes). The conclusion is that liquidity plays a role in determining corporate bond yield spread. There are significant differences in the explanatory power of the different liquidity measures; among the liquidity measures, zero-return percentage works best. Preliminary findings, based on the …