Financial Engineering Seminar Series: Haiyue Yu (Two Sigma)

Headshot of Haiyue Yu
Topic

Institutional Ownership and Liquidity in the Corporate Bond Market

Abstract

Since 2005, the relationship between corporate bond credit spreads and secondary market illiquidity has strengthened, increasing the liquidity component in credit spreads. Short-term investors, such as mutual funds and ETFs, amplify price frictions through increased trading. A model incorporating investor heterogeneity shows that changes in investor composition, driven by the rise of mutual funds and ETFs, explain aggregated trends in the corporate bond market.

Investor concentration significantly impacts bond liquidity and pricing, especially during financial crises, influencing both immediate price drops and subsequent recoveries.

Biography

Haiyue earned a Ph.D. in Economics from Princeton in 2022, with a thesis focusing on institutional ownership and liquidity in the U.S. corporate bond market.

His research has been accepted for publication in the Journal of Finance. After graduation, he joined a hedge fund, where he specializes in systematic macro research.