The Liquidity Premium of Near-Money Assets

@inproceedings{Nagel2014TheLP,
  title={The Liquidity Premium of Near-Money Assets},
  author={Stefan Nagel},
  year={2014}
}
Near-money assets are money substitutes for storing liquidity. As a consequence, the liquidity premium of near-money assets is tied to the opportunity cost of holding money. When money does not bear interest, this opportunity cost is given by the level of short-term interest rates. The time-series behavior of liquidity premia of T-bills and other near-money assets in the US, Canada, and the UK since the 1970s is consistent with this prediction. In the US, for example, the spread between… CONTINUE READING
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