The Rest of the World's Dollar-Weighted Return on U.S. Treasurys

33 Pages Posted: 10 Jan 2022 Last revised: 30 Sep 2023

See all articles by Zhengyang Jiang

Zhengyang Jiang

Kellogg School of Management - Department of Finance; National Bureau of Economic Research (NBER)

Arvind Krishnamurthy

Stanford Graduate School of Business; National Bureau of Economic Research (NBER); Stanford University - Stanford Institute for Economic Policy Research

Hanno N. Lustig

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 21, 2021

Abstract

Since 1980, foreign investors have timed their purchases and sales of U.S. Treasurys to yield particularly low returns. Their annual “dollar-weighted” returns, measured by the internal rate of return on their purchases and sales of Treasury bonds, are over 3.26 percentage points (pp) lower than a buy-and-hold strategy over the same horizon. Their returns are 1.62 pp lower than the returns earned by domestic investors. We also explore the heterogeneity across foreign investors, and find that official investors and developing country investors underperform more than other foreign investors. Our results are consistent with theories in which foreign investors are price-inelastic buyers of safe dollar assets, and increase their demand for dollar assets in stress periods.

Keywords: U.S. Treasury, Exorbitant Privilege, Safe Asset Demand

Suggested Citation

Jiang, Zhengyang and Krishnamurthy, Arvind and Lustig, Hanno N., The Rest of the World's Dollar-Weighted Return on U.S. Treasurys (September 21, 2021). Available at SSRN: https://ssrn.com/abstract=3928006 or http://dx.doi.org/10.2139/ssrn.3928006

Zhengyang Jiang

Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
United States

HOME PAGE: http://sites.google.com/site/jayzedwye/

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Arvind Krishnamurthy

Stanford Graduate School of Business ( email )

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Hanno N. Lustig (Contact Author)

Stanford Graduate School of Business ( email )

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National Bureau of Economic Research (NBER)

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