Dion Bongaerts receives a best paper award at the meeting of the European Finance Association

<link portal page _self>Dion Bongaerts received the “SAC Capital Advisors L.P. Best Conference Paper Award” at the annual meeting of the European Finance Association for his paper “An asset pricing approach to liquidity effects in corporate bond markets”, co-authored by Frank de Jong and Joost Driessen. In this paper, an asset pricing approach is employed to compare the effects of expected liquidity and liquidity risk on expected U.S. corporate bond returns. The results show that expected bond liquidity and exposure to equity market liquidity risk affect expected bond returns, and that these liquidity effects explain a substantial part of the credit spread puzzle. In contrast, the authors find robust evidence that exposure to corporate bond liquidity shocks carries an economically negligible risk premium. The authors develop a simple theoretical model to explain this result.