Trading Activity in the Corporate Bond Market: A SAD Tale of Macro-Announcements and Behavioral Seasonality?

James Forest, Ben S. Branch and Brian T. Berry
Additional contact information
Ben S. Branch: Professor (Emeritus) of Finance, Isenberg School of Management, University of Massachusetts, Amherst, MA 01003, USA
Brian T. Berry: Independent

Risks, 2024, vol. 12, issue 5, 1-25

Abstract: This study investigates the determinants of trading activity in the U.S. corporate bond market, focusing on the effects of Seasonal Affective Disorder (SAD) and macroeconomic announcements. Employing the General-to-Specific (Gets) Autometrics methodology, we identify distinct behavioral responses between retail and institutional investors to SAD, noting a significant impact on retail trading volumes but not on institutional trading or bond returns. This discovery extends the understanding of behavioral finance within the context of bond markets, diverging from established findings in equity and Treasury markets. Additionally, our analysis delineates the influence of macroeconomic announcements on trading activities, offering new insights into the market’s reaction to economic news. This study’s findings contribute to the broader literature on market microstructure and behavioral finance, providing empirical evidence on the interplay between psychological factors and macroeconomic information flow within corporate bond markets. By addressing these specific aspects with rigorous econometric techniques, our research enhances the comprehension of trading dynamics in less transparent markets, offering valuable perspectives for academics, investors, risk managers, and policymakers.

Keywords: macroeconomic announcements; corporate bonds; trading; Autometrics; seasonality; seasonal affective disorder; behavioral finance (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-9091/12/5/80/pdf (application/pdf)
https://www.mdpi.com/2227-9091/12/5/80/ (text/html)

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:gam:jrisks:v:12:y:2024:i:5:p:80-:d:1394432

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().