The Liquidity Premium of Near-Money Assets

@inproceedings{Nagel2014TheLP,
  title={The Liquidity Premium of Near-Money Assets},
  author={Stefan Werner Nagel},
  year={2014}
}
Treasury bills and other near-money assets provide owners with liquidity service benefits that are reflected in prices in the form of a liquidity premium. I relate time variation in this liquidity premium to changes in the opportunity cost of money: The liquidity service benefits of near-money assets are more valuable when short-term interest rates are high and hence the opportunity cost of holding money is high. Consistent with this prediction, the liquidity premium of T-bills and other near… CONTINUE READING

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