Download or read book Liquidity and Yield Spreads of Corporate Bonds written by Sergei Ivanovich Tishchenko and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: Corporate bond bid-ask spreads explain 40 percent of the temporal variation in yield spreads when daily individual bond data are used. Other known yield spread determinants such as the level and slope of the treasury yield curve, aggregate equity returns and implied volatility jointly explain only 10 percent of the yield spread variation. On average, approximately 60 percent of the bid-ask spread is impounded in the corporate yield spread. The estimates of the yield spread sensitivity to bid-ask spread changes are remarkably stable across bonds with different Standard & Poor's credit grades ranging from AAA to CC. This evidence supports the view that corporate bond liquidity is an important yield spread determinant.