Salgspres i erhvervsobligationer og dets implikationer på event-studier

Michala Hjelm-Hansen

Student thesis: Master thesis


The main purpose of this master thesis is to derive and present a search model for a temporary selling pressure in the corporate bond market. The over-the-counter market (OTC-market) for corporate bonds is quite illiquid which makes the structure of this market a bit special compared to the market of other OTC-products. The structure involves that prices of corporate bonds is a result of a bargaining process between a dealer and an investor. Hence, in this master thesis prices of corporate bonds will be determined by solving the problem facing an investor in order to maximize his utility through future consumption. When derived, the model will be used as a theoretical motivation for an empirical measure of temporary selling pressure. This measure will make it possible to extend the definition of a selling pressure, to a definition that enables researchers to determine selling pressure in real time. Selling pressure is generally defined as a period in which the number of sellers in a market outweighs the number of buyers. By the search model derived in this master thesis it will be clear that selling pressure can likewise be defined by the price difference between small (trading volume < 50.000) and large trades (trading volume > 100.000). I find that data of corporate bond trades exhibit selling pressure during the financial crisis. Furthermore I find strong evidence that prices of large trades of corporate bonds which are subject to selling pressure will converge towards the prices of small trades. Therefore it is concluded that the empirical real time measure of temporary selling pressure describes the behaviour of observed corporate bond prices in an accurate way. Finally, data indicates that it is possible to use the extended definition of a temporary selling pressure to separate the effect of a corporate event on abnormal bond returns into an event-return and a ’selling pressure’-return. This result indicates that in periods with selling pressure the fairest price of a corporate bond is the price of small trades since these trades are subject to less selling pressure. The previous general perception of researchers within event studies of corporate bonds have been that prices of large trades were most accurate since these trades have tighter bid/ask-spreads. Hence, the conclusion of this master thesis contributes to the existing literature by challenging this perception.

EducationsMSc in Mathematics , (Graduate Programme) Final Thesis
Publication date2017
Number of pages150