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Abstract: 

This paper examines extreme cases of transaction costs using data from new issue municipal bond issuance in California from 2007 to 2009. The authors use quantile regression to systematically test whether observable characteristics of the bond sale influence whether a case will be extreme or not. They also use the regression residuals approach to identify transaction cost outliers. The paper then examines the offering statements and other published data for these outliers to attempt to determine why the transaction costs are inordinately large. When controlling for scale, the authors find little difference in observable bond characteristics across quantiles. The outlier analysis identifies certain practices that are associated with extreme transaction cost outliers.

Keywords: Municipal bond issuance, transaction costs, issuance costs, economies of scale, outliers

Affiliations:  1: University of Connecticut; 2: University of Connecticut.