Measuring the Perceived Liquidity of the Corporate Bond Market

45 Pages Posted: 5 May 2020

See all articles by Sergey Chernenko

Sergey Chernenko

Purdue University - Department of Management

Aditya Sunderam

Harvard University

Multiple version iconThere are 2 versions of this paper

Date Written: May 2020


We propose a novel measure of bond market liquidity that does not depend on transaction data: the strength of the cross-sectional relationship between mutual fund cash holdings and fund flow volatility. Our measure captures how liquid funds perceive their portfolio holdings to be at a given point in time. The perceived liquidity of speculative grade and Rule 144A bonds is significantly lower than investment grade bonds in the cross section and deteriorated significantly following the 2008-9 financial crisis. Our measure can be applied in settings where either transaction data are not available or transactions are rare, including the markets for asset-backed securities, syndicated loans, and municipal bonds.

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Suggested Citation

Chernenko, Sergey and Sunderam, Aditya, Measuring the Perceived Liquidity of the Corporate Bond Market (May 2020). NBER Working Paper No. w27092, Available at SSRN:

Sergey Chernenko (Contact Author)

Purdue University - Department of Management ( email )

West Lafayette, IN 47907-1310
United States
(765) 494-4413 (Phone)

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Aditya Sunderam

Harvard University ( email )

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