Treasury Bills (treasury + bill)

Distribution by Scientific Domains


Selected Abstracts


Reward-to-Risk Ratios in the Treasury-Bill Market

FINANCIAL REVIEW, Issue 3 2001
Eugene A. Pilotte
G12 Abstract We estimate the ex-ante reward per unit of spot-rate volatility (the reward-to-risk ratio) for U.S. Treasury bills on a monthly basis and find that these ratios vary predictably over time. Reward-to-risk ratios are positively autocorrelated; month-to-month changes in these ratios are negatively autocorrelated. Variation in these ratios contributes at least as much variation to ex-ante excess returns as does variation in interest-rate volatility. Because ex-ante volatility and the rewards to volatility vary independently, variation in ex-ante premiums is greater than the variation attributable to changing volatility alone. [source]


GLOBAL EVIDENCE ON THE EQUITY RISK PREMIUM

JOURNAL OF APPLIED CORPORATE FINANCE, Issue 4 2003
Elroy Dimson
The size of the equity risk premium,the incremental return that shareholders require to hold risky equities rather than risk-free securities,is a key issue in corporate finance. Financial economists generally measure the equity premium over long periods of time in order to obtain reliable estimates. These estimates are widely used by investors, finance professionals, corporate executives, regulators, lawyers, and consultants. But because the 20th century proved to be a period of such remarkable growth in the U.S. economy, estimates of the risk premium that rely on past market performance may be too high to serve as a reliable guide to the future. The authors analyze a 103-year history of risk premiums in 16 countries and conclude that the U.S. risk premium relative to Treasury bills was 5.3% for that period,lower than previous studies suggest,as compared to 4.2% for the U.K. and 4.5% for a world index. But the article goes on to observe that the historical record may still overstate expectations of the future risk premium, partly because market volatility in the future may be lower than in the past, and partly because of a general decline in risk resulting from new technological advances and increased diversification opportunities for investors. After adjusting for the expected impact of these factors, the authors calculate forward-looking equity risk premiums of 4.3% for the U.S., 3.9% for the U.K., and 3.5% for the world index. At the same time, however, they caution that the risk premium can fluctuate over time and that managers should make appropriate adjustments when there are compelling economic reasons to think that expected premiums are unusually high or low. [source]


Foreign currency for long-term investors*

THE ECONOMIC JOURNAL, Issue 486 2003
John Y. Campbell
Conventional wisdom holds that conservative investors should avoid exposure to foreign currency risk. Even if they hold foreign equities, they should hedge the currency exposure of these positions and hold only domestic Treasury bills. This paper argues that the conventional wisdom may be wrong for long-term investors. Domestic bills are risky for long-term investors, because real interest rates vary over time and bills must be rolled over at uncertain future interest rates. This risk can be hedged by holding foreign currency if the domestic currency tends to depreciate when the domestic real interest rate falls. Empirically this effect is important. [source]


THE EFFECT OF AUCTION FORMAT ON EFFICIENCY AND REVENUE IN DIVISIBLE GOODS AUCTIONS: A TEST USING KOREAN TREASURY AUCTIONS,

THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 2 2008
BOO-SUNG KANG
This paper measures the efficiency and revenue properties of the two most popular formats for divisible goods auctions: the uniform-price and discriminatory auction. We analyze bids into the Korean Treasury auctions which have used both formats. We find that the discriminatory auction yields statistically higher revenue. Unlike previous work that uses data from only one format, we are able to compare the efficiency properties of the two formats. We find that the discriminatory auction better allocates treasury bills to the highest value financial institutions. However, the differences in revenue and efficiency are not large because the auctions are very competitive. [source]