Liquidity shocks in the secondary corporate loan market

John Anthony, Paul Docherty, Doowon Lee, Abul Shamsuddin

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)


This article examines the influence of liquidity risk on the U.S. secondary corporate loan market (herein loan market). The authors empirically disentangle the impact of both loan-level liquidity shocks and systematic liquidity risk from default risk. Loans that experience shocks to either liquidity or default risk experience ongoing price declines, complementing evidence presented elsewhere of price momentum in loan markets. The prices of loans with high liquidity risk are significantly discounted when market liquidity is low, consistent with the time-varying funding liquidity constraints of financial intermediaries. In keeping with a close link between high risk debt markets and equity markets, there is evidence that equity market risk is priced in the loan market.

Original languageEnglish
Pages (from-to)53-72
Number of pages20
JournalJournal of Fixed Income
Issue number4
Publication statusPublished - 1 Mar 2017
Externally publishedYes

Cite this