Abstract
We examine price pressure in a setting where trades occur because of regulations. Our study of fallen angel bond sales by insurance companies shows that price pressure is not significantly different from zero when information effects are absent. Our results confirm the prediction of several theoretical models that sellers will benefit from a higher price when they are able to separate themselves out to dealers as uninformed. We find that insurers do not attempt to hide their trades by selling bonds before they are downgraded, consistent with following a strategy of sunshine trading, as in Admati and Pfleiderer (1991).
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