The Value of Data to Fixed Income Investors

Using a structural model, we estimate the value of data to fixed income investors and study its main drivers. In the model, data is more valuable for bonds that are volatile and for which price-insensitive liquidity trades are more likely. Empirically, we find that the value of data on corporate bonds increases with yield, time-to-maturity, size, callability, liquidity, and uncertainty during normal times. However, these cross-sectional differences vanish as the value of data falls during financial crises. Using a regression discontinuity based on maturity, we provide causal evidence that investor composition affects the value of data.