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Explaining the on-the-run effect

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TitleInfo
Title
Explaining the on-the-run effect
SubTitle
implications for financial reporting
Name (type = personal)
NamePart (type = family)
Anderson
NamePart (type = given)
Anthony J.
NamePart (type = date)
1957-
DisplayForm
Anthony Anderson
Role
RoleTerm (authority = RULIB)
author
Name (type = personal)
NamePart (type = family)
Long
NamePart (type = given)
Michael S
DisplayForm
Michael S Long
Affiliation
Advisory Committee
Role
RoleTerm (authority = RULIB)
chair
Name (type = personal)
NamePart (type = family)
Ronen
NamePart (type = given)
Tavy
DisplayForm
Tavy Ronen
Affiliation
Advisory Committee
Role
RoleTerm (authority = RULIB)
internal member
Name (type = personal)
NamePart (type = family)
Sarath
NamePart (type = given)
Bharat
DisplayForm
Bharat Sarath
Affiliation
Advisory Committee
Role
RoleTerm (authority = RULIB)
internal member
Name (type = personal)
NamePart (type = family)
Spiegel
NamePart (type = given)
Matthew
DisplayForm
Matthew Spiegel
Affiliation
Advisory Committee
Role
RoleTerm (authority = RULIB)
outside member
Name (type = corporate)
NamePart
Rutgers University
Role
RoleTerm (authority = RULIB)
degree grantor
Name (type = corporate)
NamePart
Graduate School - Newark
Role
RoleTerm (authority = RULIB)
school
TypeOfResource
Text
Genre (authority = marcgt)
theses
OriginInfo
DateCreated (qualifier = exact)
2013
DateOther (qualifier = exact); (type = degree)
2013-10
Place
PlaceTerm (type = code)
xx
Language
LanguageTerm (authority = ISO639-2b); (type = code)
eng
Abstract (type = abstract)
This dissertation proposes and tests a model for liquidity in the corporate bond market. It uses the second law of thermodynamics, to explain liquidity. In the academic literature from the physical sciences, it has been said that the principle of entropy gives rise to the regularities found in nature (Swenson 2000) [60]. The on-the-run phenomenon is regularly found in the bond markets. The on-the-run phenomenon is the yield difference observed when a new bond issue comes to market from the same issuer and gets a better price (lower yield given equivalent duration) from the market than the older issue. This is an apparent conflict with the no-arbitrage condition that two securities having the same risk and maturity must have the same price. This dissertation shows that this theoretical rule is, indeed, not violated. The yield differential is the illiquidity cost of the older issue that has increased as a result of progressing through stages which typically occur in an entropy process. This dissertation finds that a model employing an entropy measure largely explains the on-the-run phenomenon, by accounting for over two-thirds of the liquidity differential for on-the-run corporate bonds. Further, bond liquidity captured as entropy exhibits an equivalent explanatory impact on yield to maturity as credit risk. The study continues with a proposal to improve financial reporting by requiring firms to include aggregate entropy measures, by asset class, for all holdings of marketable securities, securities available-for-sale, and securities held-to-maturity, as a means of making financial reporting more relevant and informative. High entropy portfolios show superior performance in financial crisis periods, but will under perform low entropy portfolios in normal times.
Subject (authority = RUETD)
Topic
Management
RelatedItem (type = host)
TitleInfo
Title
Rutgers University Electronic Theses and Dissertations
Identifier (type = RULIB)
ETD
Identifier
ETD_4914
PhysicalDescription
Form (authority = gmd)
electronic resource
InternetMediaType
application/pdf
InternetMediaType
text/xml
Extent
viii, 140 p. : ill.
Note (type = degree)
Ph.D.
Note (type = bibliography)
Includes bibliographical references
Note (type = vita)
Includes vita
Note (type = statement of responsibility)
by Anthony J. Anderson
Subject (authority = ETD-LCSH)
Topic
Bond market
Subject (authority = ETD-LCSH)
Topic
Liquidity (Economics)
RelatedItem (type = host)
TitleInfo
Title
Graduate School - Newark Electronic Theses and Dissertations
Identifier (type = local)
rucore10002600001
Location
PhysicalLocation (authority = marcorg); (displayLabel = Rutgers, The State University of New Jersey)
NjNbRU
Identifier (type = doi)
doi:10.7282/T3W093WG
Genre (authority = ExL-Esploro)
ETD doctoral
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Rights

RightsDeclaration (ID = rulibRdec0006)
The author owns the copyright to this work.
RightsHolder (type = personal)
Name
FamilyName
Anderson
GivenName
Anthony
Role
Copyright Holder
RightsEvent
Type
Permission or license
DateTime (encoding = w3cdtf); (qualifier = exact); (point = start)
2013-07-17 00:54:42
AssociatedEntity
Name
Anthony Anderson
Role
Copyright holder
Affiliation
Rutgers University. Graduate School - Newark
AssociatedObject
Type
License
Name
Author Agreement License
Detail
I hereby grant to the Rutgers University Libraries and to my school the non-exclusive right to archive, reproduce and distribute my thesis or dissertation, in whole or in part, and/or my abstract, in whole or in part, in and from an electronic format, subject to the release date subsequently stipulated in this submittal form and approved by my school. I represent and stipulate that the thesis or dissertation and its abstract are my original work, that they do not infringe or violate any rights of others, and that I make these grants as the sole owner of the rights to my thesis or dissertation and its abstract. I represent that I have obtained written permissions, when necessary, from the owner(s) of each third party copyrighted matter to be included in my thesis or dissertation and will supply copies of such upon request by my school. I acknowledge that RU ETD and my school will not distribute my thesis or dissertation or its abstract if, in their reasonable judgment, they believe all such rights have not been secured. I acknowledge that I retain ownership rights to the copyright of my work. I also retain the right to use all or part of this thesis or dissertation in future works, such as articles or books.
Copyright
Status
Copyright protected
Availability
Status
Open
Reason
Permission or license
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Technical

RULTechMD (ID = TECHNICAL1)
ContentModel
ETD
OperatingSystem (VERSION = 5.1)
windows xp
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