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Does the Liquidity of a Debt Issue Increase with Its Size? Evidence from the Corporate Bond and Medium‐Term Note Markets
Author(s) -
CRABBE LELAND E.,
TURNER CHRISTOPHER M.
Publication year - 1995
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1995.tb05194.x
Subject(s) - issuer , bond , market liquidity , debt , maturity (psychological) , yield (engineering) , corporate bond , monetary economics , business , economics , financial economics , finance , materials science , metallurgy , psychology , developmental psychology
To investigate the liquidity of large issues, this study tests for yield differences between corporate bonds and medium‐term notes (MTNs). In the sample, MTNs have an average issue size of $4 million, compared with $265 million for bonds. Among MTNs that have the same issuance date, the same maturity date, and the same corporate issuer, we find no relation between size and yields. Moreover, bonds and MTNs have statistically equivalent yields. Thus, rather than suggesting that large issues have greater liquidity, these findings indicate that large and small securities issued by the same borrower are close substitutes.