The Cost of Immediacy for Corporate Bonds

Jens Dick-Nielsen, Marco Rossi

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Liquidity provision for corporate bonds has become significantly more expensive after the 2008 crisis. Using index exclusions as a natural experiment during which uninformed index trackers request immediacy, we find that the cost of immediacy has more than doubled. In addition, the supply of immediacy has become more elastic with respect to its price. Consistent with a stringent regulatory environment incentivizing smaller dealer inventories, we also find that dealers revert deviations from their target inventory more quickly after the crisis. Finally, we investigate the pricing impact of information, changes in ownership structure, and differences between bank and nonbank dealers.
Original languageEnglish
JournalReview of Financial Studies
Volume32
Issue number1
Pages (from-to)1-41
Number of pages41
ISSN0893-9454
DOIs
Publication statusPublished - Jan 2019

Bibliographical note

Published online: 24 July 2018

Keywords

  • Asset pricing
  • Trading volume
  • Bond interest rates
  • Panel data models
  • Spatio-temporal models

Cite this

Dick-Nielsen, Jens ; Rossi, Marco. / The Cost of Immediacy for Corporate Bonds. In: Review of Financial Studies. 2019 ; Vol. 32, No. 1. pp. 1-41.
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The Cost of Immediacy for Corporate Bonds. / Dick-Nielsen, Jens; Rossi, Marco.

In: Review of Financial Studies, Vol. 32, No. 1, 01.2019, p. 1-41.

Research output: Contribution to journalJournal articleResearchpeer-review

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