Trading activity and price volatility in the municipal bond market

Preprint
Publisher Website
Google Scholar
  • 1 January 2002
    • preprint
      • Published in RePEc
Abstract
Utilizing a comprehensive database of transactions in municipal bonds, we investigate the volume-volatility relationship in the muni market. We find a positive relationship between the number of transactions and a bond's price volatility. In contrast to previous studies, we find a negative relationship between average deal size and price volatility. These results are found to be robust throughout the sample. Our results are inconsistent with current theoretical models of the volume-volatility relationship. These inconsistencies may arise because current models fail to account for the effects of overall market liquidity on the costs of large transactions.
All Related Versions

This publication has 0 references indexed in Scilit: