TY - JOUR
T1 - Market-making costs in Treasury bills: A benchmark for the cost of liquidity
T2 - A benchmark for the cost of liquidity
AU - Winters, Drew
AU - Griffiths, M
AU - Lindley, J
PY - 2010/9
Y1 - 2010/9
N2 - We focus on market-making costs by examining the daily bid-ask spreads for off-the-run, one-month Treasury bills around two liquidity-changing events. Event one, Salomon Brothers' supply shock, results in a roughly 2.5-basis-point increase in the spread because of an increase in ask prices; and event two, the Long-Term Capital Management demand shock, results in a doubling of the spread because of a decrease in bid prices. Our results provide a benchmark for researchers examining bid-ask spreads of securities that include a liquidity premium, a risk premium, and an asymmetric information premium.
AB - We focus on market-making costs by examining the daily bid-ask spreads for off-the-run, one-month Treasury bills around two liquidity-changing events. Event one, Salomon Brothers' supply shock, results in a roughly 2.5-basis-point increase in the spread because of an increase in ask prices; and event two, the Long-Term Capital Management demand shock, results in a doubling of the spread because of a decrease in bid prices. Our results provide a benchmark for researchers examining bid-ask spreads of securities that include a liquidity premium, a risk premium, and an asymmetric information premium.
KW - Bid-ask spread
KW - Liquidity
KW - Market-making costs
UR - http://www.scopus.com/inward/record.url?scp=77954142618&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2010.02.004
DO - 10.1016/j.jbankfin.2010.02.004
M3 - Article
VL - 34
SP - 2146
EP - 2157
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 9
ER -