Determinants of Corporate Bond Trading: A Comprehensive Analysis

Edith Hotchkiss and Gergana Jostova ()
Additional contact information
Edith Hotchkiss: Department of Finance, Carroll School of Management, Fulton Hall 340, Boston College, Chestnut Hill, MA, USA
Gergana Jostova: Department of Finance, School of Business, George Washington University, Funger Hall Suite 501, 2201 G St NW, Washington, DC 20052, USA

Quarterly Journal of Finance (QJF), 2017, vol. 07, issue 02, 1-30

Abstract: This paper studies the determinants of trading volume and liquidity of corporate bonds. Using transactions data from a comprehensive dataset of insurance company trades, our analysis covers more than 17,000 US corporate bonds of 4,151 companies over a five-year period prior to the introduction of TRACE. Our transactions data show that a variety of issue- and issuer-specific characteristics impact corporate bond liquidity. Among these, the most economically important determinants of bond trading volume are the bond’s issue size and age — trading volume declines substantially as bonds become seasoned and are absorbed into less active portfolios. Stock-level activity also impacts bond trading volume. Bonds of companies with publicly traded equity are more likely to trade than those with private equity. Further, public companies with more active stocks have more actively traded bonds. Finally, we show that while the liquidity of high-yield bonds is more affected by credit risk, interest-rate risk is more important in determining the liquidity of investment-grade bonds.

Keywords: Institutional trading; liquidity; corporate bonds; NAIC (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2010139217500033
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:qjfxxx:v:07:y:2017:i:02:n:s2010139217500033

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2010139217500033

Access Statistics for this article

Quarterly Journal of Finance (QJF) is currently edited by Fernando Zapatero

More articles in Quarterly Journal of Finance (QJF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().