Transparency and Liquidity: A Controlled Experiment on Corporate Bonds

This article reports the results of an experiment designed to assess the impact of lastsale trade reporting on the liquidity of BBB corporate bonds. Overall, adding transparency has either a neutral or a positive effect on liquidity. Increased trans is not associated with greater trading volume. Exc...

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Veröffentlicht in:The Review of financial studies 2007-03, Vol.20 (2), p.235-273
Hauptverfasser: Goldstein, Michael A., Hotchkiss, Edith S., Sirri, Erik R.
Format: Artikel
Sprache:eng
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Zusammenfassung:This article reports the results of an experiment designed to assess the impact of lastsale trade reporting on the liquidity of BBB corporate bonds. Overall, adding transparency has either a neutral or a positive effect on liquidity. Increased trans is not associated with greater trading volume. Except for very large trades, spreads on newly transparent bonds decline relative to bonds that experience no transparency change. However, we find no effect on spreads for very infrequently traded bonds. The observed decrease in transaction costs is consistent with investors' ability to negotiate better terms of trade once they have access to broader bond-pricing data.
ISSN:0893-9454
1465-7368
DOI:10.1093/rfs/hhl020