Working papers
Fig_FlipUW_Mlogit.pdfCorporate Bond Flipping (with L. Wang)
In this paper, we provide the first empirical evidence on corporate bond flipping. We show that when flipping their allocation in an offering, investors avoid selling to the underwriters despite underwriters providing better prices. Offerings with worse aftermarket performance are flipped less, but this is true whether flipping to underwriters or non-underwriters, suggesting that underwriters discourage flipping in both overpriced and underpriced offerings. Investors flipping to the underwriters receive less profitable allocations in these underwriters' subsequent offerings. Overall, underwriters seem to want to limit flipping and use their allocation discretion to penalize flippers.
Best paper award semifinalist, 2021 FMA Annual Conference
Conferences: 2021 Women in Microstructure Meeting, 2021 FMA, 2022 FMA Europe
Dealer Behavior and the Trading of Newly Issued Corporate Bonds (with M. Goldstein and E. Hotchkiss)
This paper examines dealers' secondary market trading in newly issued corporate bonds to understand who gains from aftermarket sales to customers at higher prices. Retail investors largely purchase bonds from non-underwriters at increasing prices, while institutions buy from underwriters at higher prices initially but lower prices longer term. Non-underwriters derive market power from their ability to reach investors with weak trading connections to underwriters, while underwriters benefit from a short-lived information advantage obtained from the bookbuilding process. Overall, most gains from selling bonds at higher secondary market prices accrue to non-underwriters, and are unlikely to be recaptured by issuers.
Conferences: 2021 MFA, 2020 FIFI, 2020 SAFE Market Microstructure, 2020 FIRS (COVID-cancelled), 2020 CFIC (COVID-cancelled), 2020 SGF Conference (COVID-cancelled), 2019 FRIC Conference on Financial Frictions, 2019 Banque de France-ESSEC Workshop on OTC Markets
Table 6. Price dispersion of underwriters (UW) versus non-underwriters over the first 10 days post-issuance
Figure_CDS_bonds_Ref_new.pdfThe Transaction Costs of Trading Corporate Credit (with G. Biswas and C. W. Stahel)
To examine whether corporate credit risk is cheaper to trade in the bond or credit-default swap (CDS) market, we estimate individual roundtrip transaction costs for 851 CDSs traded during 2009-2014. Effective half-spreads are 14 bps of the notional amount for dealer-to-enduser and 12 bps for dealer-to-dealer trades for the most common notional traded, $2.5-7.5M. Cross-sectionally, effective spreads are weakly correlated with indicative quoted spreads, higher for more actively traded contracts, and related to reference obligation/entity characteristics. For institutional-size trades up to $500K, bonds are three times as expensive as the corresponding CDSs, but at larger trade sizes this pattern reverses.
Reject & resubmit at The Journal of Finance
Conferences: AFA 2015, FIRS 2015, FiFi 2015, FMA Europe 2015