A Structural Study of Fixed Income Securities with Intraday Data

I use two different metrics, with three different announcement windows for each, based on event studies, with intraday fixed income (FI) and equity data on all publicly traded U.S. companies over 2014-2021, as separate objective and systematic measures of the efficiency of the market for an FI security. I use a seven-equation structural model with market efficiency as a function of exogenous factors and endogenous market activities, and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities, and I apply Three Stage Least Squares and Errors in Variables to estimate the structural system, using panel-based instrumentation strategies. I calculate the total impact of a factor which is the sum of the direct impact and the indirect impacts, and by using the Gaussian cumulative distribution of the Z-score of each variable (except for an indicator variable), I make the impacts comparable, this allows a systematic and objective definition of economic significance. I find that year & quarter has a statistically significant but economically insignificant negative impact on market efficiency of FI securities, that Nasdaq listing of issuing firm, investor valuation dispersion of issuing firm, and short sales costs & constraints of equity of issuing firm have statistically and economically significant negative impacts on market efficiency of FI securities, and that transaction costs & constraints of equity of issuing firm has a statistically and economically ambiguous impact on market efficiency of FI securities