Liquidity, Labels and Medium‐Term Notes

Donald J. Mullineaux and Ivan C. Roten

Financial Markets, Institutions & Instruments, 2002, vol. 11, issue 5, 445-467

Abstract: We suggest that the medium‐term note market provides an excellent laboratory for exploring the relationships between yield, liquidity, and the label affixed to a financial instrument. Crabbe and Turner (1995) examined the liquidity issue and uncovered the counter‐intuitive result that issue size is unrelated to liquidity. Their study failed to examine a potential channel for a liquidity effect, however, in the form of multiple issues from a single, typically large, MTN registration filing. We find evidence that file size is significantly related to yield in a number of instances. Several other proxies for liquidity, such as frequency of issue, are also sometimes significantly related to yields. Contrary to Crabbe and Turner (1995), we find that labeling a security an MTN can have an impact on its yield. The label “note” also appears to matter for yield in some instances.

Date: 2002
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https://doi.org/10.1111/1468-0416.11501

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Persistent link: https://EconPapers.repec.org/RePEc:wly:finmar:v:11:y:2002:i:5:p:445-467

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