Corporate Bond Multipliers: Substitutes Matter

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ID: 329382
2026
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Abstract
Abstract Many economic questions require estimating the price effect of demand shifts (multipliers) in the bond market. Corporate bonds have salient characteristics that distinguish between close and distant substitutes. We show that accounting for heterogeneous substitutability between bonds is critical for correctly estimating multipliers. We find that security-level multipliers are very small. In fact, an order of magnitude smaller than the estimate ignoring heterogeneous substitutability. Nonetheless, portfolio multipliers are substantially larger and monotonically increase with the aggregation level. Furthermore, we find that the multiplier is larger for high-yield bonds, longer-maturity bonds, and bonds with greater arbitrage risks.
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openalex_W7165497596 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Manav Chaudhary, Julie Zhiyu Fu, Jian Li
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Journal review of financial studies
Year 2026
DOI
10.1093/rfs/hhag082
URL
https://doi.org/10.1093/rfs/hhag082
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