Investor attention and municipal bond returns

Research output: Contribution to journalArticlepeer-review

5 Scopus citations


We analyze whether investors in opaque markets price information from more transparent markets. Exploiting the natural experiment created by bond-insurer insolvency, we show that U.S. municipal bond investors did not price early signs of insurers’ increased default risk revealed through the equity and CDS markets, and only reacted when these insurers were later downgraded. Institutional investors respond to information faster than retail investors, but still with significant delay. The severity of the investor inattention we document is relevant to the current debate over the costs and benefits of SEC proposals to improve the timeliness and quality of local government disclosure.

Original languageEnglish (US)
Article number100738
JournalJournal of Financial Markets
StatePublished - Sep 2022

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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