Illiquidity or Credit Deterioration: A Study of Liquidity in the US Corporate Bond Market during Financial Crises

We use a unique data-set to study liquidity effects in the US corporate bond market, covering more than 30,000 bonds. Our analysis explores time-series and cross-sectional aspects of corporate bond yield spreads, with the main focus being on the quanti fication of the impact of liquidity factors, while controlling for credit risk. Our time period starts in October 2004 when detailed transaction data from the Trade Reporting and Compliance Engine (TRACE) became available. In particular, we examine three diff erent regimes during our sample period, the GM/Ford crisis in 2005 when a segment of the corporate bond market was a ffected, the sub-prime crisis since mid-2007, which was much more pervasive across the corporate bond market, and the period in between, when market conditions were more normal. We employ a wide range of liquidity measures and fi nd in our time-series analysis that liquidity eff ects explain approximately one third of market-wide corporate yield spread changes, in general, and are even more pronounced during periods of crisis. In particular, the price dispersion measure proposed by Jankowitsch, Nashikkar and Subrahmanyam (2008) explains about half of the aggregate bond yield spread changes during the sub-prime crisis. Our data-set allows us to examine in greater detail liquidity e ffects in various segments of the market: financial sector fi rms which have been particularly aff ected by the crisis vs. industrial firms, investment grade vs. speculative grade bonds, and retail vs. institutional trades. In addition, our cross-sectional analysis shows that liquidity explains a large part of the variation in yield spreads across bonds, after accounting for credit risk. These results yield important insights regarding the liquidity drivers of corporate yield spreads, particularly during periods of crisis

Secondary Market Liquidity and Security Design: Theory and Evidence from ABS Markets

We develop and empirically test a theory of optimal security design under adverse selection accounting for strategic trading by uninformed investors who will liquidate a security in secondary markets only if their idiosyncratic carrying costs exceed the security's expected trading loss. Such investors demand primary market discounts equaling expected carrying costs borne plus trading losses incurred. Issuers minimize the total illiquidity discount by splitting cash-flow into tranched debt claims with liquidity predicted to increase with seniority, while the optimal number of tranches increases with underlying cash-flow risk. Empirical tests confirm our model predictions

Illiquidity or credit deterioration: A study of liquidity in the US corporate bond market during

We investigate whether liquidity is an important price factor in the US corporate bond market. In particular, we focus on whether liquidity eects are more pronounced in periods of nancial crises, especially for bonds with high credit risk, using a unique data set covering more than 20,000 bonds, between October 2004 and December 2008. We employ a wide range of liquidity measures and nd that liquidity eects account for approximately 14% of the explained market-wide corporate yield spread changes. We conclude that the economic impact of the liquidity measures is signicantly larger in periods of crisis, and for speculative grade bonds

Bedeutung und Entwicklungsstand der Integrierten Tierärztlichen Bestandsbetreuung (ITB) in milcherzeugenden landwirtschaflichen Betrieben in Bayern

Seit 1993 wird die Integrierte Tierärztliche Bestandsbetreuung (ITB) als umfassendes kuratives wie präventives Qualitätssicherungsinstrument angeboten. Das Ziel der vorliegenden Studie war es, die Entwicklung, die Verbreitung und die gegenwärtige Bedeutung der ITB in milcherzeugenden landwirtschaftlichen Betrieben in Bayern zu untersuchen. Milcherzeugende Betriebe aus 28 bayerischen Landkreisen wurden dazu befragt. Eine Rücklaufquote von fast 50% ergab eine repräsentative Anzahl von 1.430 auswertbaren Fragebögen mit jeweils bis zu 170 erhobenen Variablen. 5,8% der befragten Betriebe führten zum Zeitpunkt der Erhebung bereits eine ITB durch. Es konnte u.a. nachgewiesen werden, dass mit der Größe des Betriebes auch deren Spezialisierung und Professionalität steigt. Insgesamt ließen sich hohe Interkorrelationen zwischen sämtlichen qualitätssichernden Maßnahmen nachweisen. Diese Werte blieben auch nach Kontrolle der Betriebsgröße stabil und es bildete sich ein Spektrum betriebswirtschaftlicher Verfahrensweisen und entsprechender Einstellungen ab: Bestimmte Betriebsleiter erfüllen nur die Mindestanforderungen der Qualitätssicherung, andere haben sich eigenverantwortlich für ein durchgängiges Qualitätsmanagement entschieden und können den Erfolg ihres Engagements in Qualität, Quantität und weiteren betriebswirtschaftlichen Ergebnissen nachweisen. Die Frage nach dem Beanntheitsgrad der ITB beantworteten 41% der befragten Landwirte positiv. Sie gaben des Weiteren an, darunter neben der kurativen und präventiven Kernkompetenz des Veterinärs eine systematische qualitätsorientierte Kooperation bis hin zu einem gemeinsamen Controlling zu verstehen. Die Betriebsleiter äußerten sich zugleich kritisch zur Effizienz der ITB; jeder sechste der Betriebe, die bisher ohne ITB arbeiteten, sieht einen Bedarf dafür. Die vorliegende Untersuchung konnte nachweisen, dass Tierärzte, die sich für diese Aufgabe hinreichend qualifiziert haben, den Landwirten neben den Inhalten einer systematischen qualitätssichernden Aktivität, wie sie durch die ITB angeboten wird, auch deren Nutzen und Effizienz für den Betrieb erkenntlich machen können

Illiquidity or credit deterioration: A study of liquidity in the US corporate bond market during

We investigate whether liquidity is an important price factor in the US corporate bond market. In particular, we focus on whether liquidity eects are more pronounced in periods of nancial crises, especially for bonds with high credit risk, using a unique data set covering more than 20,000 bonds, between October 2004 and December 2008. We employ a wide range of liquidity measures and nd that liquidity eects account for approximately 14% of the explained market-wide corporate yield spread changes. We conclude that the economic impact of the liquidity measures is signicantly larger in periods of crisis, and for speculative grade bonds

The determinants of credit spreads changes in global shipping bonds.

yesThis paper investigates whether bond, issuer, industry and macro-specific variables account for the observed variation of credit spreads’ changes of global shipping bond issues before and after the onset of the subprime financial crisis. Results show that conclusions as to the significant variables of spreads depend significantly on whether two-way clusteradjusted standard errors are utilized, thus rendering results in the extant literature ambigious. The main determinants of global cargo-carrying companies’ shipping bond spreads are found in this paper to be: the liquidity of the bond issue, the stock market’s volatility, the bond market’s cyclicality, freight earnings and the credit rating of the bond issue

Liquidity effects and FFA returns in the international shipping derivatives market

The study examines the impact of liquidity risk on freight derivatives returns. The Amihud liquidity ratio and bid–ask spreads are utilized to assess the existence of liquidity risk in the freight derivatives market. Other macroeconomic variables are used to control for market risk. Results indicate that liquidity risk is priced and both liquidity measures have a significant role in determining freight derivatives returns. Consistent with expectations, both liquidity measures are found to have positive and significant effects on the returns of freight derivatives. The results have important implications for modeling freight derivatives, and consequently, for trading and risk management purposes