Anticipated and Repeated Shocks in Liquid Markets

Jinfan Zhang, Hongjun Yan and Dong Lou
Additional contact information
Dong Lou: Loudon School of Economics

No 1446, 2011 Meeting Papers from Society for Economic Dynamics

Abstract: We show that Treasury security prices in the secondary market decrease significantly before auctions and recover shortly after. Hence, Treasury security prices tend to be lower on auction days, implying a large issuance cost for the Treasury Department, which is estimated to be 9-18 basis points of the auction size (amounts to over half a billion dollars for issuing Treasury notes in 2007). These results appear to be consistent with the hypothesis of dealers’ limited risk-bearing capacity and the imperfect capital mobility of Treasury investors, highlighting the important role of capital mobility even in the most liquid financial markets.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2011/paper_1446.pdf (application/pdf)

Related works:
Journal Article: Anticipated and Repeated Shocks in Liquid Markets (2013)
Working Paper: Anticipated and Repeated Shocks in Liquid Markets (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed011:1446

Access Statistics for this paper

More papers in 2011 Meeting Papers from Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().