Price impact of corporate bond trading

evidence from the Australian Securities Exchange

Alex Frino, Grace Gong, Andrew Lepone

Research output: Chapter in Book/Report/Conference proceedingConference proceeding contribution

Abstract

This study examines the price effects of investment-grade corporate bond transactions on the Australian Securities Exchange. Results indicate that both purchases and sales of exchange traded corporate bonds incur significant transaction costs upon execution. Post execution, purchases of all sizes either experience price continuations, or no significant price reversals, suggesting the presence of information. Sales of all sizes experience complete price reversals, implying that selling corporate bonds conveys no information to the market. These results are consistent with the majority of equity market studies that document a similar asymmetry between purchases and sales. Analysis of the determinants of price effects associated with bond market trades reveals that trade size, market conditions, underlying stock price volatility, underlying stock turnover, bid-ask spreads and market depth are associated with the magnitude of price movements surrounding these trades.
Original languageEnglish
Title of host publicationPapers from the IV World Finance Conference
PublisherWorld Finance Conference
Pages1-27
Number of pages27
Publication statusPublished - 2013
EventWorld Finance Conference (4th : 2013) - Limassol, Cyprus
Duration: 1 Jul 20133 Jul 2013

Conference

ConferenceWorld Finance Conference (4th : 2013)
CityLimassol, Cyprus
Period1/07/133/07/13

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Keywords

  • floating rate notes
  • price impact
  • information effects
  • liquidity effects

Cite this

Frino, A., Gong, G., & Lepone, A. (2013). Price impact of corporate bond trading: evidence from the Australian Securities Exchange. In Papers from the IV World Finance Conference (pp. 1-27). World Finance Conference.