Journal of Financial and Quantitative Analysis Vol. 49 No. 5-6 2014
Treasury Bond Illiquidity and Global Equity Returns
Abstract
In this study, using data from 46 markets and a 34-year time period, we examine the impact of the illiquidity of U.S. Treasuries on global asset valuation. We find that it predicts equity returns in both developed and emerging markets. This predictive relation remains intact after controlling for various world- and country-level variables. Asset pricing tests further reveal that bond illiquidity is a priced factor even in the presence of other conventional risks. Since the illiquidity of Treasuries is known to reflect monetary and macroeconomic shocks, our results suggest that it can be considered a proxy for aggregate worldwide risks.
- DOI
- 10.1017/s0022109014000362
- Volume
- 49
- Issue
- 5-6
- Pages
- 1227-1253
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref