This paper tests for seasonal patterns in corporate bond returns using the Dow Jones Composite Bond Average. Each seasonal pattern documented for equities is investigated. For the period 1963–1986, corporate bond returns exhibit January, turn-of-the-year, and weekof-the-month effects, but no significant day-of-the-week or turn-of-the-month effects. In contrast, for the S&P 500 stock index, the turn-of-the-month and day-of-the-week effects are highly significant, but the week-of-the-month effect is less significant, and the January and turn-of-the-year effects are insignificant. The behavior of an equity index constructed using companies in the bond index is similar to that of the S&P, except the turn-of-the-year effect is significant.

This paper uses a unique financial instrument in the U.S. Treasury market to study the price behavior of the put option embedded in the November 2009 14 callable U.S. Treasury bond. We find that, beginning in August 1993, the estimated option value was persistently negative on nearly every day for the ensuing eight months. We show that the anomalous pricing behavior arose because the underlying callable bond became the cheapest to deliver issue against U.S. Treasury bond futures contracts. Hence, this paper provides direct evidence that derivative assets can significantly distort pricing in the primary asset market.

This study uses Treasury bond triplets, which consist of three different Treasury issues with a common maturity date, to investigate the theoretical and empirical influence of tax strategies on Treasury prices. The tax-option effect, which arises from the right to optimally realize gains and losses for tax purposes, is found to induce convexity in the relation among triplet bond prices, but the effect is too small to create an arbitrage opportunity. A previous study [Litzenberger and Rolfo (1984)] is shown to incorrectly isolate the tax-option effect and hence misstate some key result; a correction is provided.

Duffie (1996) examines the theoretical impact of repo “specials” on the prices of Treasury securities and concludes that, all else the same, an issue on special will carry a higher price than an otherwise identical issue. We examine this hypothesis and find strong evidence in support of it. We also examine whether the liquidity premium associated with “on-the-run” issues is due to repo specialness and find evidence of a distinct effect. Finally, we investigate whether auction tightness and percentage awarded to dealers are related to subsequent specialness and find that both variables àre generally significant.

Darrell Duffie (1996) examines the theoretical impact of repo 'specials' on the prices of Treasury securities and concludes that, all else the same, an issue on special will carry a higher price than an otherwise identical issue. The authors examine this hypothesis and find strong evidence in support of it. They also examine whether the liquidity premium associated with 'on-the-run' issues is due to repo specialness and find evidence of a distinct effect. Finally, the authors investigate whether auction tightness and percentage awarded to dealers are related to subsequent specialness and find that both variables are generally significant.

Duffie (1996) examines the theoretical impact of repo “specials” on the prices of Treasury securities and concludes that, all else the same, an issue on special will carry a higher price than an otherwise identical issue. We examine this hypothesis and find strong evidence in support of it. We also examine whether the liquidity premium associated with “on‐the‐run” issues is due to repo specialness and find evidence of a distinct effect. Finally, we investigate whether auction tightness and percentage awarded to dealers are related to subsequent specialness and find that both variables àre generally significant.

Stocks with relatively high short interest subsequently experience negative abnormal returns, but the effect can be transient and of debatable economic significance. In contrast, relatively heavily traded stocks with low short interest experience both statistically and economically significant positive abnormal returns. These positive returns are often larger (in absolute value) than the negative returns observed for heavily shorted stocks. Thus, the positive information associated with low short interest, which is publicly available, is only slowly incorporated into prices, which raises a broader market efficiency issue. Our results also cast doubt on existing theories of the impact of short sale constraints.