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| Author: | Green, R.C. Hollifield, B. Schurhoff, N. |
| Title: | Dealer intermediation and price behavior in the aftermarket for new bond issues |
| Journal: | Journal of Financial Economics
2007 : DEC, VOL. 86:3, p. 643-682 |
| Index terms: | bond markets new issues prices dealers models |
| Language: | eng |
| Abstract: | In decentralized broker-dealer markets, municipal bonds are traded and underpriced when issued. However, unlike equities, the average price rises slowly over several days. Newly issued municipal bonds have high levels of price dispersion with the average price rising due to change over time in the trade sizes mix. While large trades occur close to the reoffering (here as: r-offg.) price, small trades occur btw. the r-offg. price to as much as 5 percent above the r-offg. price. Using a mixed-distribution model, quantified are the losses uninformed traders or issuers give up to broker-dealers. |
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