Skip to main content
Journal cover image

Flight-to-quality or flight-to-liquidity? Evidence from the euro-area bond market

Publication ,  Journal Article
Beber, A; Brandt, MW; Kavajecz, KA
Published in: Review of Financial Studies
March 1, 2009

Do bond investors demand credit quality or liquidity? The answer is both, but at different times and for different reasons. Using data on the Euro-area government bond market, which features a unique negative correlation between credit quality and liquidity across countries, we show that the bulk of sovereign yield spreads is explained by differences in credit quality, though liquidity plays a nontrivial role, especially for low credit risk countries and during times of heightened market uncertainty. In contrast, the destination of large flows into the bond market is determined almost exclusively by liquidity. We conclude that credit quality matters for bond valuation but that, in times of market stress, investors chase liquidity, not credit quality.

Duke Scholars

Altmetric Attention Stats
Dimensions Citation Stats

Published In

Review of Financial Studies

DOI

EISSN

1465-7368

ISSN

0893-9454

Publication Date

March 1, 2009

Volume

22

Issue

3

Start / End Page

925 / 957

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1502 Banking, Finance and Investment
  • 1402 Applied Economics
  • 1401 Economic Theory
 

Citation

APA
Chicago
ICMJE
MLA
NLM
Beber, A., Brandt, M. W., & Kavajecz, K. A. (2009). Flight-to-quality or flight-to-liquidity? Evidence from the euro-area bond market. Review of Financial Studies, 22(3), 925–957. https://doi.org/10.1093/rfs/hhm088
Beber, A., M. W. Brandt, and K. A. Kavajecz. “Flight-to-quality or flight-to-liquidity? Evidence from the euro-area bond market.” Review of Financial Studies 22, no. 3 (March 1, 2009): 925–57. https://doi.org/10.1093/rfs/hhm088.
Beber A, Brandt MW, Kavajecz KA. Flight-to-quality or flight-to-liquidity? Evidence from the euro-area bond market. Review of Financial Studies. 2009 Mar 1;22(3):925–57.
Beber, A., et al. “Flight-to-quality or flight-to-liquidity? Evidence from the euro-area bond market.” Review of Financial Studies, vol. 22, no. 3, Mar. 2009, pp. 925–57. Scopus, doi:10.1093/rfs/hhm088.
Beber A, Brandt MW, Kavajecz KA. Flight-to-quality or flight-to-liquidity? Evidence from the euro-area bond market. Review of Financial Studies. 2009 Mar 1;22(3):925–957.
Journal cover image

Published In

Review of Financial Studies

DOI

EISSN

1465-7368

ISSN

0893-9454

Publication Date

March 1, 2009

Volume

22

Issue

3

Start / End Page

925 / 957

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1502 Banking, Finance and Investment
  • 1402 Applied Economics
  • 1401 Economic Theory