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Liquidity Premium in the Eye of the Beholder

Liquidity Premium in the Eye of the Beholder PDF Author: Xuanjuan Chen
Publisher:
ISBN:
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Languages : en
Pages : 53

Book Description
This paper examines how liquidity and investors' heterogeneous liquidity preferences interact toaffect asset pricing. Using data on insurers' corporate bond holdings, we find that the illiquidity ofcorporate bond portfolios varies widely and persistently across insurers, and is related to insurers'investment horizons and funding constraints, consistent with the notion of liquidity clientele. Wefurther find that liquidity clienteles affect corporate bond prices|specifically, liquidity premia arelower among corporate bonds heavily held by investors with a weaker preference for liquidity.
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