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Liquidity measures throughout the lifetime of the U.S. Treasury bond

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  • Díaz, Antonio
  • Escribano, Ana

Abstract

We examine the price impact of different components of liquidity throughout the lifetime of the U.S. Treasury bond. Using the GovPX dataset, we provide a comprehensive empirical analysis of the impact of several liquidity proxies on the relative liquidity premium of these securities. The findings show that the liquidity premium has a deterministic main age-based component. This aging effect extends beyond the simple on-the-run/off-the-run effect. There is also a stochastic component of the liquidity premium that depends on the unexpected value of microstructure-based liquidity proxies and the current market- and bond-level conditions.

Suggested Citation

  • Díaz, Antonio & Escribano, Ana, 2017. "Liquidity measures throughout the lifetime of the U.S. Treasury bond," Journal of Financial Markets, Elsevier, vol. 33(C), pages 42-74.
    • Handle: RePEc:eee:finmar:v:33:y:2017:i:c:p:42-74
    DOI: 10.1016/j.finmar.2017.01.002
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    6. Díaz, Antonio & Escribano, Ana, 2022. "Liquidity dimensions in the U.S. corporate bond market," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 1163-1179.
    7. Antonio Díaz & Francisco Jareño & Eliseo Navarro, 2020. "Yield curves from different bond data sets," Review of Derivatives Research, Springer, vol. 23(2), pages 191-226, July.
    8. Díaz, Antonio & Jareño, Francisco & Navarro, Eliseo, 2018. "Zero-coupon interest rates: Evaluating three alternative datasets," Economics Discussion Papers 2018-67, Kiel Institute for the World Economy (IfW Kiel).
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    11. Hincapié-Salazar, Juliana & Agudelo, Diego A., 2020. "Is the disposition effect in bonds as strong as in stocks? Evidence from an emerging market," Global Finance Journal, Elsevier, vol. 46(C).
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    More about this item

    Keywords

    Liquidity; Fixed income; Pricing; Life cycle; Government bonds;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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