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Efficiency and sustainability of bond market: Evidence from aftermarket trading of US corporate bond offerings

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  • Yang, Lisa
  • Goh, Jeremy C.

Abstract

We find that for bond offerings that are non-self-marketed, there is a significantly larger proportion of institutional-sized sell trades than buy. In stark contrast, for self-marketed offerings by underwriters, immediate post-offer trading is characterized by a larger proportion of institutional-sized buy trades than sell. We also find evidence suggesting that retail investors, who are initially shut out of the offering deals, buy bonds in the secondary market at a higher price. Our evidence suggests that certain institutional investors receiving allocations of non-self-marketed offerings flip them for a quick profit. The systematic disparity in aftermarket trading immediately following self-marketed versus non-self-marketed bond offerings suggests that the offering process is inefficient, which may have implications on the sustainability of bond offering process.

Suggested Citation

  • Yang, Lisa & Goh, Jeremy C., 2024. "Efficiency and sustainability of bond market: Evidence from aftermarket trading of US corporate bond offerings," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24001367
    DOI: 10.1016/j.pacfin.2024.102385
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    References listed on IDEAS

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