The Effect of Substitute Assets On Yields In Financial Markets
Document Type
Article
Publication Date
3-1-2007
Department
Finance, Real Estate, and Business Law
Abstract
We examine the link between volume and liquidity in money markets where there are close substitutes. We find that the size of the market, as a proxy for trading volume, affects yield spreads over T-bill rates. We examine the bankers acceptances market, when market size declined by half over the decade of the 1990s. Controlling for interest-rate levels, day-of-the-week, calendar, term structure, credit spread, time-series, and cross-equation effects, we find that the substitution effect does not eliminate the impact of market-size changes on rates, but it does preserve the hierarchy of rates across instruments.
Publication Title
Financial Management
Volume
36
Issue
1
First Page
27
Last Page
47
Recommended Citation
Cyree, K. B.,
Lindley, J. T.,
Winters, D. B.
(2007). The Effect of Substitute Assets On Yields In Financial Markets. Financial Management, 36(1), 27-47.
Available at: https://aquila.usm.edu/fac_pubs/2063