PT - JOURNAL ARTICLE AU - Hai Lin AU - Junbo Wang AU - Chunchi Wu TI - Liquidity Risk and Momentum Spillover<br/>from Stocks to Bonds AID - 10.3905/jfi.2013.23.1.005 DP - 2013 Jun 30 TA - The Journal of Fixed Income PG - 5--42 VI - 23 IP - 1 4099 - https://pm-research.com/content/23/1/5.short 4100 - https://pm-research.com/content/23/1/5.full AB - This article investigates the role of liquidity risk in the momentum spillover from stocks to bonds by using a large data sample. The evidence strongly suggests that liquidity risk is an important determinant of momentum spillover returns. This finding is robust to controls for effects of trading liquidity, credit risk, behavioral factors, and bond characteristics. On average, liquidity risk explains about 40% of momentum spillover profits for investment-grade bonds and 55% for speculative-grade bonds over the 16-year sample period. A significant portion of momentum spillover returns can be viewed as compensation for investors’ exposure to liquidity risk when engaging in trading this anomaly.TOPICS: Fixed income and structured finance, analysis of individual factors/risk premia