Title: Liquidity risk of corporate bond returns
Description: "We study the exposure of the U.S.  corporate bond returns to liquidity shocks of stocks and treasury bonds over the period 1973 to 2007.  A decline in liquidity of stocks or Treasury bonds produces conflicting effects: Prices of investment-grade bonds rise while prices of speculative grade bonds fall substantially.  This effect is regime-switching in nature and holds when the state of the economy is in a "stress" regime.  The likelihood of being in such a regime can be predicted by macroeconomic and financial market variables that are associated with adverse economic conditions.  Our model can predict the out-of-sample bond returns for the stress years 2008-2009.  These effects are robust to controlling for other systematic risks (term and default).  Our findings suggest the existence of time-varying liquidity risk of corporate bond returns and episodes of flight to liquidity"--National Bureau of Economic Research web site.