کد مقاله کد نشریه سال انتشار مقاله انگلیسی نسخه تمام متن
5090750 1375644 2008 17 صفحه PDF دانلود رایگان
عنوان انگلیسی مقاله ISI
Liquidity, default, taxes, and yields on municipal bonds
موضوعات مرتبط
علوم انسانی و اجتماعی اقتصاد، اقتصادسنجی و امور مالی اقتصاد و اقتصادسنجی
پیش نمایش صفحه اول مقاله
Liquidity, default, taxes, and yields on municipal bonds
چکیده انگلیسی

We examine the effects of liquidity, default and personal taxes on the relative yields of Treasuries and municipals using a generalized model with liquidity risk. The municipal yield model includes liquidity as a state factor. Using a unique transaction dataset, we estimate the liquidity risk of municipals and its effect on bond yields. Empirical evidence shows that municipal bond yields are strongly affected by all three factors. The effects of default and liquidity risk on municipal yields increase with maturity and credit risk. Liquidity premium accounts for about 9-13% of municipal yields for AAA bonds, 9-15% for AA/A bonds and 8-19% for BBB bonds. A substantial portion of the maturity spread between long- and short-maturity municipal bonds is attributed to the liquidity premium. Ignoring the liquidity risk effect thus results in a severe underestimation of municipal bond yields. Conditional on the effects of default and liquidity risk, we obtain implicit tax rates very close to the statutory tax rates of high-income individuals and institutional investors. Furthermore, these implicit income tax rates are quite stable across bonds of different maturities. Results show that including liquidity risk in the municipal bond pricing model helps explain the muni puzzle.

ناشر
Database: Elsevier - ScienceDirect (ساینس دایرکت)
Journal: Journal of Banking & Finance - Volume 32, Issue 6, June 2008, Pages 1133-1149
نویسندگان
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