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The market for new issues of municipal bonds: The roles of transparency and limited access to retail investors

  • Schultz, Paul
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    I examine how transparency and interdealer trading affects prices investors pay in municipal bond offerings. Real-time trade reporting for municipal bonds started January 31, 2005. The dispersion of purchase prices fell sharply at that time. There was little impact on average markups for most trades, but they increased for purchases of more than $100,000. Bonds often pass through a series of dealers before being placed with a buy-and-hold investor. As the interdealer trades progress, trade sizes decline and trade prices rise. Markups on investor purchases increase with the amount of interdealer trading before the trade.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0304405X12001547
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    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 106 (2012)
    Issue (Month): 3 ()
    Pages: 492-512

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    Handle: RePEc:eee:jfinec:v:106:y:2012:i:3:p:492-512
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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    1. Darrell Duffie & Semyon Malamud & Gustavo Manso, 2009. "Information Percolation With Equilibrium Search Dynamics," Econometrica, Econometric Society, vol. 77(5), pages 1513-1574, 09.
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    6. Richard C. Green & Dan Li & Norman Schürhoff, 2010. "Price Discovery in Illiquid Markets: Do Financial Asset Prices Rise Faster Than They Fall?," Journal of Finance, American Finance Association, vol. 65(5), pages 1669-1702, October.
    7. Richard Green & Burton Hollifield & Norman Schurhoff, . "Dealer Intermediation and Price Behavior in the Aftermarket for New Bond Issues," GSIA Working Papers 2005-E56, Carnegie Mellon University, Tepper School of Business.
    8. Haoxiang Zhu, 2012. "Finding a Good Price in Opaque Over-the-Counter Markets," Review of Financial Studies, Society for Financial Studies, vol. 25(4), pages 1255-1285.
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