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Liquidity, Maturity, and the Yields on U.S. Treasury Securities

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  • Amihud, Yakov
  • Mendelson, Haim

Abstract

The effects of asset liquidity on expected returns for assets with infinite maturities (stocks) are examined for bonds (Treasury notes and bills with matched maturities of less than six months). The yield to maturity is higher on notes, which have lower liquidity. The yield differential between notes and bills is a decreasing and convex function of the time to maturity. The results provide a robust confirmation of the liquidity effect in asset pricing. Copyright 1991 by American Finance Association.

Suggested Citation

  • Amihud, Yakov & Mendelson, Haim, 1991. "Liquidity, Maturity, and the Yields on U.S. Treasury Securities," Journal of Finance, American Finance Association, vol. 46(4), pages 1411-1425, September.
    • Handle: RePEc:bla:jfinan:v:46:y:1991:i:4:p:1411-25
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