Crabbe is from Merrill Lynch & Co. Turner is from Chase Manhattan Bank, NA. We received helpful comments from Christopher Baum, Jean Helwege, Joel Lander, John Rea, David Simon, Nick Walraven, seminar participants at Southern Methodist University, René Stulz, the editor, and an anonymous referee.
Does the Liquidity of a Debt Issue Increase with Its Size? Evidence from the Corporate Bond and Medium-Term Note Markets
Article first published online: 30 APR 2012
1995 The American Finance Association
The Journal of Finance
Volume 50, Issue 5, pages 1719–1734, December 1995
How to Cite
CRABBE, L. E. and TURNER, C. M. (1995), Does the Liquidity of a Debt Issue Increase with Its Size? Evidence from the Corporate Bond and Medium-Term Note Markets. The Journal of Finance, 50: 1719–1734. doi: 10.1111/j.1540-6261.1995.tb05194.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
To investigate the liquidity of large issues, this study tests for yield differences between corporate bonds and medium-term notes (MTNs). In the sample, MTNs have an average issue size of $4 million, compared with $265 million for bonds. Among MTNs that have the same issuance date, the same maturity date, and the same corporate issuer, we find no relation between size and yields. Moreover, bonds and MTNs have statistically equivalent yields. Thus, rather than suggesting that large issues have greater liquidity, these findings indicate that large and small securities issued by the same borrower are close substitutes.