The difference a day makes: Timely disclosure and trading efficiency in the muni market |
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| Authors: | John Chalmers,Yu Liu,Z. Jay Wang |
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| Affiliation: | 1. Lundquist College of Business, University of Oregon, Eugene, OR 97403, United States;2. Department of Business & Information Technology, Missouri S&T, Rolla, MO 65409, United States;1. Erasmus Scchool of Economics - Burgemeester Oudlaan 50, Erasmus University Rotterdam, Rotterdam PA 3062, the Netherlands;2. Tilburg University - Warandelaan 2, Tilburg AB 5037, the Netherlands;1. Rotterdam School of Management, Erasmus University, Department of Finance, Burgemeester Oudlaan 50, P.O. Box 1738, DR Rotterdam 3000, the Netherlands;2. KU Leuven, Faculty of Economics and Business (FEB), Antwerp Carolus Campus, Korte Nieuwstraat 33, Antwerp 2000, Belgium;3. The Liquid House, Aalmoezenierstraat 13, Antwerp 2000, Belgium;1. Harvard Business School, United States;2. Princeton University, United States |
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| Abstract: | The Real-Time Transaction Reporting System (RTRS) reduced the delay in reporting municipal bond trades from one-day to 15 min. We find a significant reduction in secondary market trading costs after the introduction of the RTRS. Our estimates imply that retail investors benefited primarily from reduced dealer intermediation costs, while large trades benefited from reductions in bargaining costs. Bonds experienced increases in trading volume across the liquidity spectrum. We find higher dealer capital commitment, longer intermediation chains, and fewer pre-arranged trades, all suggesting increased market-making incentives for dealers. These results are largely consistent with predictions from search-based models. |
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