41 Pages Posted: 5 Mar 2008 Last revised: 5 Jun 2017
Date Written: October 25, 2012
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 as a proxy for aggregate worldwide risks.
Keywords: asset allocation, cross-market linkages, bond illiquidity premium, conditional asset pricing
JEL Classification: G12, G15
Suggested Citation: Suggested Citation
Goyenko, Ruslan and Sarkissian, Sergei, Treasury Bond Illiquidity and Global Equity Returns (October 25, 2012). Journal of Financial and Quantitative Analysis, 2014, 49(5-6), 1227-1253; EFA 2008 Athens Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1100174 or http://dx.doi.org/10.2139/ssrn.1100174
By Andrew Ang