Table 4.

Dealer inventory and transaction costs.

This table presents results from estimating Eq. (6) and its variants. Sample is from Febuary 1, 2020 to May 19, 2020. The dependent variable is $Cos{t}_j$, the transaction cost for trade $j$, estimated using Eq. (1). $DealerNetBu{y}_{i,t-1}$ is the net buying across all dealers for bond $i$ on day $t-1$. $CumDealerNetBu{y}_{i,t-1}$ is the accumulation of the daily net dealer buying since the beginning of February. $Crisi{s}_t$ ($Regulatio{n}_t$) is a dummy that takes the value of one if the execution date ($t$) is March 6 (March 20) or after. Log(Age) and Log(Time to Maturity) refer to the log of number of years since issuance and number of years to maturity, respectively. Credit rating fixed effects are based on each bond's composite rating. Trade size fixed effects are based on the four size categories (i.e., micro, odd lot, round lot, and block). Standard errors are clustered at bond and day levels.

Variable	(1)	(2)	(3)
Dealer Net Buy	−0.025***
	(−4.19)
Cum Dealer Net Buy		−0.068***	0.016
		(−4.98)	(0.71)
Crisis*Cum Dealer Net Buy			−0.064⁎⁎⁎
			(−3.43)
Regulation*Cum Dealer Net Buy			0.053⁎⁎⁎
			(3.01)
Log(Time to Maturity)	11.596***	11.577***	11.589***
	(11.48)	(11.45)	(11.46)
Log(Age)	6.789***	6.720***	6.689***
	(19.96)	(20.18)	(20.09)
Bond fixed effects	Yes	Yes	Yes
Credit rating fixed effects	Yes	Yes	Yes
Dealer fixed effects	Yes	Yes	Yes
Trade size fixed effects	Yes	Yes	Yes
Day fixed effects	Yes	Yes	Yes
Number of observations	1224,923	1224,923	1224,923
R2	0.32	0.32	0.32