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Liquidity, Reconstitution, and the Value of u.s. Treasury Strips.

Phillip R Daves; Michael C Ehrhardt
Journal of Finance 1993 48(1), 315-29
An apparent pricing anomaly exists in the market for U.S. Treasury strips: zero-coupon strips created from principal payments typically trade at significantly higher prices than otherwi se identical zero-coupon strips created from coupon payments. In additi on to documenting this phenomenon, this study demonstrates that differences in liquidity and differences in reconstitution characteristics explain much of this price variation.

Liquidity, Reconstitution, and the Value of U.S. Treasury Strips

Phillip R Daves; Michael C Ehrhardt
Journal of Finance 1993 48(1), 315-329
An apparent pricing anomaly exists in the market for U.S. Treasury strips: zero‐coupon strips created from principal payments typically trade at significantly higher prices than otherwise identical zero‐coupon strips created from coupon payments. In addition to documenting this phenomenon, this study demonstrates that differences in liquidity and differences in reconstitution characteristics explain much of this price variation.