Keywords
price pressure effect, market segmentation, treasury liquidity
Abstract
A price pressure effect is implied by segmentation in the market for a security. An empirical property of a segmented market is that the price of the security is sensitive to supply and demand conditions for that specific security, absent changes in risk and absent any new information. This paper examines intra-day trading data from the inter-dealer broker market for U.S. Treasury securities and finds that there is a price pressure effect in the off-the-run Treasury market. Thus, securities that would appear to be very close substitutes, i.e., on-the-run and off-the-run Treasury bonds, behave as if there is some degree of market segmentation. There have been several studies of price pressure in the equity market and Treasury bill market but this is the first study of the off-the-run Treasury note and bond market to investigate a price pressure effect using intra-day data. It is also the first study to analyze price pressure through matched pairs of securities that differ only in liquidity and with high frequency data.
Original Publication Citation
The Effect of Transaction Size on Off-the-Run Treasury Prices, with David Babbel, Mark Meyer, and Meiring de Villiers, Journal of Financial and Quantitative Analysis, September 2004.
BYU ScholarsArchive Citation
Babbel, David F.; Merrill, Craig B.; Meyer, Mark F.; and Villiers, Meiring de, "The Effect of Transaction Size on Off-the-Run Treasury Prices" (2004). Faculty Publications. 9124.
https://scholarsarchive.byu.edu/facpub/9124
Document Type
Peer-Reviewed Article
Publication Date
2004
Publisher
Journal of Financial and Quantitative Analysis
Language
English
College
Marriott School of Business
Department
Finance
Copyright Use Information
https://lib.byu.edu/about/copyright/