Abstract
Trading activity varies widely across individual corporate bond issues. The most active issues change hands multiple times each trading day, while the average bond issue does not trade at all over the course of 35% of the months examined. This article utilizes TRACE transaction data to examine the factors associated with corporate bond liquidity and demonstrates that trading activity depends upon the relative visibility of the bond issue to investors, the degree to which investor opinions regarding company value differ, and the likelihood of private information regarding the bond issue existing in the market. <b>TOPICS:</b>Information providers/credit ratings, statistical methods, exchanges/markets/clearinghouses
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