Corporate bond liquidity and yield spreads: A review

Michael A. Goldstein and Elmira Shekari Namin

Research in International Business and Finance, 2023, vol. 65, issue C

Abstract: Secondary market illiquidity is an important non-default factor affecting yield spreads. Yet, a review of the literature suggests the findings are mixed, both regarding the relative size of the default versus non-default components as well as the relative importance of liquidity premium for investment-grade and high-yield bonds. While in theory country and currency risk might affect international bonds' yield spreads, empirical findings show that international corporate bonds pricing and liquidity are generally affected by the same factors as the U.S. market. We identify several other areas of disagreement and challenges in the literature that warrant further research.

Keywords: Corporate bond; Liquidity; Yield; Credit spread; TRACE (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:65:y:2023:i:c:s027553192300051x

DOI: 10.1016/j.ribaf.2023.101925

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