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Liquidity, Labels and Medium‐Term Notes

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  • Donald J. Mullineaux
  • Ivan C. Roten

Abstract

We suggest that the medium‐term note market provides an excellent laboratory for exploring the relationships between yield, liquidity, and the label affixed to a financial instrument. Crabbe and Turner (1995) examined the liquidity issue and uncovered the counter‐intuitive result that issue size is unrelated to liquidity. Their study failed to examine a potential channel for a liquidity effect, however, in the form of multiple issues from a single, typically large, MTN registration filing. We find evidence that file size is significantly related to yield in a number of instances. Several other proxies for liquidity, such as frequency of issue, are also sometimes significantly related to yields. Contrary to Crabbe and Turner (1995), we find that labeling a security an MTN can have an impact on its yield. The label “note” also appears to matter for yield in some instances.

Suggested Citation

  • Donald J. Mullineaux & Ivan C. Roten, 2002. "Liquidity, Labels and Medium‐Term Notes," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 11(5), pages 445-467, December.
    • Handle: RePEc:wly:finmar:v:11:y:2002:i:5:p:445-467
    DOI: 10.1111/1468-0416.11501
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    References listed on IDEAS

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    1. Crabbe, Leland E & Turner, Christopher M, 1995. "Does the Liquidity of a Debt Issue Increase with Its Size? Evidence from the Corporate Bond and Medium-Term Note Markets," Journal of Finance, American Finance Association, vol. 50(5), pages 1719-1734, December.
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