Price Impact of Corporate Bond Trading: Evidence from the Australian Securities Exchange

摘要

This study examines the price effects of investment-grade-corporate bond transactions on the Australian Securities Exchange (ASX). Results indicate that both purchases and sales of exchange traded corporate bonds incur significant transaction costs upon execution. Post execution, purchases of all sizes either experience price continuations, or no significant price reversals, suggesting the presence of information. Sales of all sizes experience complete price reversals, implying that selling corporate bonds conveys no information to the market. These results are consistent with the majority of equity market studies that document a similar asymmetry between purchases and sales. Analysis of the determinants of price effects associated with bond market trades reveals that trade-size, market conditions, underlying stock price volatility, underlying stock turnover, bid-ask spreads (BAS), and market depth are associated with the magnitude of price movements surrounding these trades. Contemporaneous equity returns appear to have no effect on the price impact of corporate bonds.