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Liquidity and corporate yield spreads: lessons from Tunisian bond market

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  • Tarek Chebbi
  • Slaheddine Hellara

Abstract

This paper explores the role of liquidity risk in the pricing of corporate bonds. We show that this risk is a priced factor for the credit spread associated with corporate bonds. Therefore, the liquidity spread helps to clarify the credit-spread puzzle. This finding suggests that credit spreads may include a liquidity premium that is ignored by traditional pricing models. Further, corporate bond spreads have insignificant exposures to fluctuations in equity market liquidity.

Suggested Citation

  • Tarek Chebbi & Slaheddine Hellara, 2010. "Liquidity and corporate yield spreads: lessons from Tunisian bond market," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 3(3), pages 207-226.
    • Handle: RePEc:ids:ijmefi:v:3:y:2010:i:3:p:207-226
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    Cited by:

    1. Olfa Berrich & Halim Dabbou, 2023. "Tunisian corporate bond market liquidity: a qualitative approach," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 15(5), pages 795-819, February.

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