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Liquidity, Labels and Medium‐Term Notes
Author(s) -
Mullineaux Donald J.,
Roten Ivan C.
Publication year - 2002
Publication title -
financial markets, institutions and instruments
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 23
eISSN - 1468-0416
pISSN - 0963-8008
DOI - 10.1111/1468-0416.11501
Subject(s) - market liquidity , yield (engineering) , term (time) , monetary economics , business , economics , physics , quantum mechanics , thermodynamics
We suggest that the medium‐term note market provides an excellent laboratory for exploring the relationships between yield, liquidity, and the label affixed to a financial instrument. Crabbe and Turner (1995) examined the liquidity issue and uncovered the counter‐intuitive result that issue size is unrelated to liquidity. Their study failed to examine a potential channel for a liquidity effect, however, in the form of multiple issues from a single, typically large, MTN registration filing. We find evidence that file size is significantly related to yield in a number of instances. Several other proxies for liquidity, such as frequency of issue, are also sometimes significantly related to yields. Contrary to Crabbe and Turner (1995), we find that labeling a security an MTN can have an impact on its yield. The label “note” also appears to matter for yield in some instances.