Rainy Day Liquidity

• 成果类型: Article; Early Access
• 署名作者: Huang, Jing-Zhi; Li, Xin; Saglam, Mehmet; Yu, Tong
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; Michigan Technological University; University System of Ohio; University of Cincinnati
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.02994
• 发表日期: 2025
• 关键词: Liquidity provision; market liquidity; Corporate bonds; Funding liquidity; Life insurance

摘要

We investigate the role of insurers in providing liquidity in the corporate bond market, especially during rainy days when the aggregate dealer inventory is positive for a relatively large fraction of the outstanding bonds. We find that, on average, life insurers have positive liquidity supply in the years following the 2007-2009 financial crisis, primarily driven by their buy-side transactions. Insurers' corporate bond purchases improve the liquidity of transacted bonds and comparable bonds on rainy days. Using unusual weather-related losses realized in the affiliated property and casualty division as an instrumental variable, we show that corporate bonds purchased more by insurers have higher liquidity in subsequent periods.