Rating-Based Investment Practices and Bond Market Segmentation

Details

Serval ID
serval:BIB_CE6917BD862A
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
Rating-Based Investment Practices and Bond Market Segmentation
Journal
Review of Asset Pricing Studies
Author(s)
Chen Z., Lookman A. A., Schuerhoff N., Seppi D. J.
ISSN
2045-9920
Publication state
Published
Issued date
09/2014
Peer-reviewed
Oui
Volume
4
Number
2
Pages
162-205
Language
english
Abstract
This paper documents a new channel for rating-based bond market segmentation, which, in contrast to prior research, is based on nonregulatory investment management practices. A 2005 Lehman Brothers index redefinition provides a quasinatural experiment in which a number of previously high-yield split-rated bonds were mechanically relabeled as investment grade. Although their regulatory standing was unaffected, these bonds had abnormal yield declines of 21 basis points. These valuation changes can be traced to buying by asset-class-sensitive institutional investors for whom these bonds became investable. Reputation, regulation, indexation, and liquidity cannot explain the observed price and trading patterns.
Open Access
Yes
Create date
26/10/2016 14:30
Last modification date
21/08/2019 5:15
Usage data