Home About Latest Browse RSS Advanced Search

Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
Does trading frequency affect subordinated debt spreads?
Christopher Bianchi
Diana Hancock
Laura Kawano
Abstract

Because illiquid bonds may be relatively poorly priced, the ability to infer investor perceptions of changes in a banking organization's financial health from such bonds may be obscured. To examine the time-series effect of trading frequency on subordinated debt spreads, we consider the liquidity of subordinated debt for large, complex U.S. banking organizations over the 1987:Q2 - 2002:Q4 period. Since trade volumes are unobservable, we construct various measures of weekly trading frequency from observed bond prices. Using these indirect liquidity measures, we find evidence that trading frequency does significantly affect observed subordinated debt spreads. We also provide estimates for the premium of illiquidity.


Download Full text
Download Full text
Cite this item
Christopher Bianchi & Diana Hancock & Laura Kawano, Does trading frequency affect subordinated debt spreads?, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2005-08, 2004.
More from this series
JEL Classification:
Subject headings:
Keywords: Bonds ; Liquidity (Economics)
For corrections, contact Ryan Wolfslayer ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal