The Volcker Rule and corporate bond market making in times of stress

Bao, J; O'Hara, M; (Alex) Zhou, X

The Volcker Rule and corporate bond market making in times of stress

Bao, J O'Hara, M (Alex) Zhou, X

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Publication Type:: Journal Article
Citation:: Journal of Financial Economics, 2018, 130 (1), pp. 95 - 113
Issue Date:: 2018-10-01

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Field	Value	Language
dc.contributor.author	Bao, J	en_US
dc.contributor.author	O'Hara, M	en_US
dc.contributor.author	(Alex) Zhou, X	en_US
dc.date.issued	2018-10-01	en_US
dc.identifier.citation	Journal of Financial Economics, 2018, 130 (1), pp. 95 - 113	en_US
dc.identifier.issn	0304-405X	en_US
dc.identifier.uri	http://hdl.handle.net/10453/130518
dc.description.abstract	© 2018 Elsevier B.V. Focusing on downgrades as stress events that drive the selling of corporate bonds, we show that the illiquidity of stressed bonds has increased after the Volcker Rule. Dealers regulated by the rule have curtailed their market-making activities and non-Volcker-affected dealers have not offset the decreased activities of Volcker-affected dealers. Furthermore, even Volcker-affected dealers that are not constrained by Basel III and Comprehensive Capital Analysis and Review regulations change their behavior, inconsistent with the effects being driven by these other regulations. Because Volcker-affected dealers have been the main liquidity providers, bonds have become less liquid during times of stress due to the Volcker Rule.	en_US
dc.relation.ispartof	Journal of Financial Economics	en_US
dc.relation.isbasedon	10.1016/j.jfineco.2018.06.001	en_US
dc.subject.classification	Finance	en_US
dc.title	The Volcker Rule and corporate bond market making in times of stress	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	130	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1606 Political Science	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.issue	1	en_US
pubs.publication-status	Published	en_US
pubs.volume	130	en_US

Abstract:

© 2018 Elsevier B.V. Focusing on downgrades as stress events that drive the selling of corporate bonds, we show that the illiquidity of stressed bonds has increased after the Volcker Rule. Dealers regulated by the rule have curtailed their market-making activities and non-Volcker-affected dealers have not offset the decreased activities of Volcker-affected dealers. Furthermore, even Volcker-affected dealers that are not constrained by Basel III and Comprehensive Capital Analysis and Review regulations change their behavior, inconsistent with the effects being driven by these other regulations. Because Volcker-affected dealers have been the main liquidity providers, bonds have become less liquid during times of stress due to the Volcker Rule.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/130518