Over-the-Counter Market Frictions and Yield Spread Changes

• 成果类型: Article
• 署名作者: Friewald, Nils; Nagler, Florian
• 署名单位: Norwegian School of Economics (NHH); Bocconi University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12827
• 发表日期: 2019
• 页码: 3217-3257
• 关键词: MAKER INVENTORIES; Order imbalance; bond liquidity; trading costs; asset markets; corporate; STOCK; RISK; INFORMATION; search

摘要

We empirically study whether systematic over-the-counter (OTC) market frictions drive the large unexplained common factor in yield spread changes. Using transaction data on U.S. corporate bonds, we find that marketwide inventory, search, and bargaining frictions explain 23.4% of the variation in the common component. Systematic OTC frictions thus substantially improve the explanatory power of yield spread changes and account for one-third of their total explained variation. Search and bargaining frictions combined explain more in the common dynamics of yield spread changes than inventory frictions. Our findings support the implications of leading theories of intermediation frictions in OTC markets.