Liquidity,Maturity, and the Yields on U.S. Treasury Securities |
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Authors: | YAKOV AMIHUD HAIM MENDELSON |
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Abstract: | The effects of asset liquidity on expected returns for assets with infinite maturities (stocks) are examined for bonds (Treasury notes and bills with matched maturities of less than 6 months). The yield to maturity is higher on notes, which have lower liquidity. The yield differential between notes and bills is a decreasing and convex function of the time to maturity. The results provide a robust confirmation of the liquidity effect in asset pricing. |
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