Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/181009
Authors: 
Rischen, Tobias
Theissen, Erik
Year of Publication: 
2018
Series/Report no.: 
CFR Working Paper 18-03
Abstract: 
We conduct the most extensive study of underpricing in the euro area bond market so far and find strong evidence of underpricing. In cross-sectional regressions we find patterns that are consistent with bookbuilding-based theories of underpricing and inconsistent with liquidity-based explanations. The underpricing has increased considerably during the financial crisis and has remained at an elevated level since. We also show that secondary market liquidity in the euro area bond market is significantly lower in the post-crisis period than pre-crisis. These results are consistent with recent US evidence and may represent unintended side effects of new regulation enacted in the wake of the financial crisis, such as Basel III and the Volcker Rule. Furthermore, our evidence suggests that the ECB's asset purchase programs have led to a decrease in underpricing.
Subjects: 
Underpricing
Bond Markets
Primary Market
Post-Crisis Regulation
ECB
Unconventional Monetary Policy
Quantitative Easing
Asset Purchase Programs
JEL: 
G12
G32
E58
Document Type: 
Working Paper
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