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Bond Market Response to the Collapse of Prominent Investment Banks
Author(s) -
Li Si,
Madura Jeff,
Richie Nivine
Publication year - 2013
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12019
Subject(s) - bond , bond market , financial system , monetary economics , investment (military) , business , financial market , economics , finance , political science , law , politics
We find that the Bear Stearns rescue in March 2008 elicited a neutral or moderately favorable impact on bond prices. Conversely, we find that the Lehman Brothers failure (combined with news about Merrill Lynch and American International Group) in September 2008 elicited a pronounced negative impact. Bond prices of financial firms suffered more than bonds of nonfinancial firms following the Lehman failure. Our multivariate analysis shows that bonds issued by financial institutions that were previously presumed to be protected (based on bond rating and firm size) suffered more pronounced losses in response to the Lehman failure.