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

23 Pages Posted: 10 Jan 2022 Last revised: 14 Oct 2022

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 IRRs, are around 3% lower than a buy-and-hold strategy over the same horizon. In comparison, the IRRs achieved by domestic investors are at least 1% higher, while the IRRs achieved by the Federal Reserve are similarly low. Our results are consistent with theories where foreign investors are price-inelastic buyers of safe dollar assets, which provide them with convenience services.

Keywords: safe assets, exorbitant privilege

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/

National Bureau of Economic Research (NBER) ( email )

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Arvind Krishnamurthy

Stanford Graduate School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Stanford University - Stanford Institute for Economic Policy Research ( 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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