The relative informational efficiency of corporate retail bonds: Evidence from the London Stock Exchange

Tolikas, Konstantinos (2016). The relative informational efficiency of corporate retail bonds: Evidence from the London Stock Exchange. International Review of Financial Analysis, 46 , pp. 191-201.

Abstract

I examine the relative informational efficiency of the London Stock Exchange's newly launched Order book for Retail Bonds (ORB). I find that the daily returns for the stocks of the issuing firms lead the daily returns of the retail bonds born in the ORB. This finding also holds for pre-existing bonds that were transferred to the ORB from the LSE's Main Market and for the bonds with different credit ratings, issue sizes, and maturity times. I also find that bonds have very limited predictive ability for stock returns. Overall, the results provide strong evidence that the underlying stock market is relatively more efficient than the ORB. Further, the relative informational inefficiency of the ORB implies profitable trading opportunities for private investors.

Publication DOI: https://doi.org/10.1016/j.irfa.2016.05.003
Divisions: Aston Business School > Economics finance & entrepreneurship
Aston Business School
Uncontrolled Keywords: Order book for Retail Bonds,Relative informational efficiency,Corporate retail bonds,Lead–lag relation,London Stock Exchange
Full Text Link: http://orca.cf.ac.uk/90824/
Related URLs: https://www.sci ... 0771?via%3Dihub (Publisher URL)
Published Date: 2016-07-01
Authors: Tolikas, Konstantinos ( 0000-0001-8281-0709)

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