Liquidity Risk and Momentum Spillover from Stocks to Bonds
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
| Original language | English |
|---|---|
| Pages (from-to) | 5-42 |
| Journal / Publication | Journal of Fixed Income |
| Volume | 23 |
| Issue number | 1 |
| Publication status | Published - 2013 |
Link(s)
Abstract
This article investigates the role of liquidity risk in the momentum spillover from stocks to bonds by using a large data sample. The evidence strongly suggests that liquidity risk is an important determinant of momentum spillover returns. This finding is robust to controls for effects of trading liquidity, credit risk, behavioral factors, and bond characteristics. On average, liquidity risk explains about 40% of momentum spillover profits for investment-grade bonds and 55% for speculative-grade bonds over the 16-year sample period. A significant portion of momentum spillover returns can be viewed as compensation for investors’ exposure to liquidity risk when engaging in trading this anomaly.
Research Area(s)
- Fixed income and structured finance, analysis of individual factors/risk premia
Citation Format(s)
Liquidity Risk and Momentum Spillover from Stocks to Bonds. / Lin, Hai; Wang, Junbo; Wu, Chunchi.
In: Journal of Fixed Income, Vol. 23, No. 1, 2013, p. 5-42.
In: Journal of Fixed Income, Vol. 23, No. 1, 2013, p. 5-42.
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
