Liquidity and corporate yield spreads: lessons from Tunisian bond market

Tarek Chebbi and Slaheddine Hellara

International Journal of Monetary Economics and Finance, 2010, vol. 3, issue 3, 207-226

Abstract: This paper explores the role of liquidity risk in the pricing of corporate bonds. We show that this risk is a priced factor for the credit spread associated with corporate bonds. Therefore, the liquidity spread helps to clarify the credit-spread puzzle. This finding suggests that credit spreads may include a liquidity premium that is ignored by traditional pricing models. Further, corporate bond spreads have insignificant exposures to fluctuations in equity market liquidity.

Keywords: credit spreads; liquidity risk; corporate bonds; Tunisian bond market; Tunisian equity market; liquidity premium; credit spread puzzle; Tunisia; bond pricing. (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijmefi:v:3:y:2010:i:3:p:207-226

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