The informativeness of corporate bond trades

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

3 Scopus Citations
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Detail(s)

Original languageEnglish
Pages (from-to)367-428
Journal / PublicationReview of Pacific Basin Financial Markets and Policies
Volume14
Issue number3
Publication statusPublished - Sept 2011

Abstract

This paper examines the informational role of trades in the corporate bond market. Using transaction data, we compare the temporal relation between volume and volatility of returns for both bonds and stocks issued by the same firms. We find a dramatic difference between these two securities. While there is a strong positive relation between return volatility and volume for stocks, this relation is much weaker for corporate bonds. This finding holds not only for straight bonds but also for callable and convertible bonds. Empirical evidence reveals a very different relation between volatility and volume in the corporate bond market than predicted by standard microstructure models. Results show that the role of volume and trade frequency can be quite different across asset classes. © 2011 World Scientific Publishing Co. and Center for Pacific Basin Business, Economics and Finance Research.

Research Area(s)

  • ARCH-GARCH, Corporate bond, Informedness, Stock, VAR

Citation Format(s)

The informativeness of corporate bond trades. / Chen, Peter; Wang, Junbo; Wu, Chunchi.
In: Review of Pacific Basin Financial Markets and Policies, Vol. 14, No. 3, 09.2011, p. 367-428.

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review