Municipal Bond Liquidity and Default Risk

• 成果类型: Article
• 署名作者: Schwert, Michael
• 署名单位: University System of Ohio; Ohio State University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12511
• 发表日期: 2017
• 页码: 1683-1721
• 关键词: asset prices; MARKET; spreads; intermediation; issues; COSTS; Swaps

摘要

This paper examines the pricing of municipal bonds. I use three distinct, complementary approaches to decompose municipal bond spreads into default and liquidity components, and find that default risk accounts for 74% to 84% of the average spread after adjusting for tax-exempt status. The first approach estimates the liquidity component using transaction data, the second measures the default component with credit default swap data, and the third is a quasi-natural experiment that estimates changes in default risk around pre-refunding events. The price of default risk is high given the rare incidence of municipal default and implies a high risk premium.