RT Journal Article SR Electronic T1 Liquidity Risk and Momentum Spillover
from Stocks to Bonds JF The Journal of Fixed Income FD Institutional Investor Journals SP 5 OP 42 DO 10.3905/jfi.2013.23.1.005 VO 23 IS 1 A1 Hai Lin A1 Junbo Wang A1 Chunchi Wu YR 2013 UL https://pm-research.com/content/23/1/5.abstract 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