Treasury bond illiquidity and global equity returns

Ruslan Goyenko, Sergei Sarkissian

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

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.

Original languageEnglish
Pages (from-to)1227-1253
Number of pages27
JournalJournal of Financial and Quantitative Analysis
Volume49
Issue number5-6
Early online date7 Jul 2014
DOIs
Publication statusPublished - Dec 2014

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