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| Author: | Bessembinder, H. Maxwell, W. Venkataraman, K. |
| Title: | Market transparency, liquidity externalities, and institutional trading costs in corporate bonds |
| Journal: | Journal of Financial Economics
2006 : NOV, VOL. 82:2, p. 251-288 |
| Index terms: | bonds institutional investors stock markets trading |
| Language: | eng |
| Abstract: | This study develops a simple model of the effect of public transaction reporting on trade execution costs and tests it using a sample of insitutional trades in corporate bonds, before and afer initiation of the TRACE reporting system. Trade execution costs fell approximately 50% for bonds eligible for TRACE transaction reporting, and 20% for bonds not eligible for TRACE reporting, suggesting the presence of a "liquidity externality". The key findings are robust to changes in variables, such as interest rate volatility and trading activity that might also affect execution costs. |
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