• While liquidity has always been a particularly important feature of corporate bonds, structural shifts following regulatory changes such as Dodd-Frank and Basel III have increased interest in measuring the impact of illiquidity in the corporate bond market.
  • We study different approaches to quantify the expected bid-ask cost of trading a corporate bond and its relationship to bond characteristics.
  • Our analysis concludes that liquidity plays a significant role in explaining credit returns and provides managers with measures of the liquidity cost and risk embedded in their portfolios.
The Author

Masoud Sharif

Quantitative Research Analyst

Angie Zheng

Quantitative Research Analyst

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This paper contains hypothetical analysis . Results shown may not be attained and should not be construed as the only possibilities that exist. The analysis reflected in this information is based upon data at time of analysis. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.

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