IDEAS home Printed from https://ideas.repec.org/a/eee/empfin/v78y2024ics0927539824000550.html
   My bibliography  Save this article

Do mutual funds and ETFs affect the commonality in liquidity of corporate bonds?

Author

Listed:
  • Cotelioglu, Efe

Abstract

This paper explores the influence of increasing ownership in fixed-income ETFs and mutual funds on liquidity commonality among corporate bonds. The unpredictable nature of liquidity demands in these funds may lead to correlated trading in underlying illiquid bonds. The study finds a positive and significant relationship between ETF ownership and liquidity commonality in investment-grade corporate bonds. In contrast, mutual fund or index fund ownership does not exhibit a similar effect, a result that differentiates corporate bonds from equities. This distinction from equities is attributed to different liquidity management strategies employed by equity and corporate bond mutual funds. The paper also highlights factors contributing to the varying impacts of ETFs and mutual funds on corporate bonds, including correlated trading due to fund flows, differences in investor clienteles, and the role of ETF arbitrage activities.

Suggested Citation

  • Cotelioglu, Efe, 2024. "Do mutual funds and ETFs affect the commonality in liquidity of corporate bonds?," Journal of Empirical Finance, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:empfin:v:78:y:2024:i:c:s0927539824000550
    DOI: 10.1016/j.jempfin.2024.101520
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927539824000550
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jempfin.2024.101520?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Corporate bonds; Liquidity; Commonality; Exchange-Traded Funds (ETFs); Mutual funds;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:empfin:v:78:y:2024:i:c:s0927539824000550. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jempfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.