Sreedhar T. Bharath
Department of Finance
University of Michigan
Room D7606 ER
701 Tappan Street
Ann Arbor, MI 48109-1234
Tel: 734-763-0485
E-Mail: 
Institutional Affiliation: Arizona State University
NBER Working Papers and Publications
| September 2010 | Liquidity Risk of Corporate Bond Returns: A Conditional Approach
with Viral V. Acharya, Yakov Amihud: w16394
We study the exposure of the US corporate bond returns to liquidity shocks of stocks and Treasury bonds over the period 1973 - 2007 in a regime - switching model. In one regime, liquidity shocks have mostly insignificant effects on bond prices, whereas in another regime, a rise in illiquidity produces significant but conflicting effects: Prices of investment-grade bonds rise while prices of speculative-grade (junk) bonds fall substantially (relative to the market). Relating the probability of these regimes to macroeconomic conditions we find that the second regime can be predicted by economic conditions that are characterized as "stress." These effects, which are robust to controlling for other systematic risks (term and default), suggest the existence of time-varying liquidity risk of cor... Published: “Liquidity Risk of Corporate Bond Returns: A Conditional Approach” with Yakov Amihud and Sreedhar Bharath, Journal of Financial Economics , 110(2), 2013, 358-386. citation courtesy of 
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