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

Zhengyang Jiang, Arvind Krishnamurthy and Hanno Lustig
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Zhengyang Jiang: Kellogg School of Management, Northwestern University
Arvind Krishnamurthy: Stanford University, Graduate School of Business, and NBER
Hanno Lustig: Stanford University, Graduate School of Business, and NBER

Research Papers from Stanford University, Graduate School of Business

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.

Date: 2022-04
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