Browsing by Author "Hollifield, Burton"

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    Municipal Bond Markets
    (Anual Reviews, 2019-12) Cestau, Dario; Hollifield, Burton; Li, Dan; Schürhoff, Norman; https://ror.org/02jjdwm75
    The effective functioning of the municipal bond market is crucial for the provision of public services, as it is the largest capital market for state and municipal issuers. Prior research has documented tax, credit, liquidity, and segmentation effects in municipal bonds. Recent regulatory initiatives to improve transparency have made granular trade data available to researchers, rendering the municipal bond market a natural laboratory for the study of financial intermediation, asset pricing in decentralized markets, and local public finance. Trade-by-trade studies have found large trading costs, contemporaneous price dispersion, and other deviations from the law of one price. More research is required to understand optimal market design and the impact of post-crisis regulation, sustainability, and financial technology
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    Should State Governments Prohibit the Negotiated Sales of Municipal Bonds?
    (SSRN, 2020-08-06) Cestau, Dario; Green, Richard; Hollifield, Burton; Schuerhoff, Norman; https://ror.org/02jjdwm75
    Should legislation ban the negotiated sales of municipal bonds? What are the costs of forcing public auctions? We compare the offering yields of local governments that are forced by state law to use public auctions to the offering yields of local governments that can choose between auctions and negotiated sales. Using a sample of 369,482 school bonds issued between 2004 and 2014, we find that a restriction on negotiated sales has a negative cost instead of positive. The prohibition benefits issuers on average. The offering yields of constrained issuers are 17 basis points lower than the offering yields of unconstrained issuers. The effect is equivalent to a rating upgrade from non-rated to AA-. Nevertheless, most issuers prefer to use negotiated sales even if they do not maximize bond proceeds.