Table 3
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Bond fund ownership and U.S. Treasury return volatility

DepVar:Volatility (in %)  
Market-adjusted returns
Three-factor-adjusted returns
(1)(2)(3)(4)(5)(6)
Ownership0.053**0.080***0.070***0.058**0.082***0.071***
(2.2)(3.5)(3.7)(2.4)(3.6)(3.8)
Time-to-maturity0.007***0.007***0.008***0.006***0.006***0.007***
(11.0)(10.9)(12.2)(11.1)(10.9)(12.2)
Coupon Rate–0.002***–0.002***–0.002***–0.001***
(–4.8)(–3.1)(–4.5)(–2.8)
On-the-run–0.002**–0.004***–0.002**–0.003***
(–2.4)(–4.2)(–2.2)(–4.2)
Log(Size)0.0010.001
(1.0)(1.3)
Bid-ask Spread–0.345***–0.314***
(–5.1)(–5.0)
# of Obs17,72017,72017,72017,72017,72017,720
DepVar:Volatility (in %)  
Market-adjusted returns
Three-factor-adjusted returns
(1)(2)(3)(4)(5)(6)
Ownership0.053**0.080***0.070***0.058**0.082***0.071***
(2.2)(3.5)(3.7)(2.4)(3.6)(3.8)
Time-to-maturity0.007***0.007***0.008***0.006***0.006***0.007***
(11.0)(10.9)(12.2)(11.1)(10.9)(12.2)
Coupon Rate–0.002***–0.002***–0.002***–0.001***
(–4.8)(–3.1)(–4.5)(–2.8)
On-the-run–0.002**–0.004***–0.002**–0.003***
(–2.4)(–4.2)(–2.2)(–4.2)
Log(Size)0.0010.001
(1.0)(1.3)
Bid-ask Spread–0.345***–0.314***
(–5.1)(–5.0)
# of Obs17,72017,72017,72017,72017,72017,720

This table reports the results from Fama-MacBeth regressions of U.S. Treasury excess return volatility in quarter q on its bond fund ownership in quarter q—1. Volatility (in %) is the standard deviation (in percentage) of the daily risk-adjusted returns in a quarter. We consider two ways to compute risk-adjusted returns: market-adjusted and three-factor-adjusted. Market-adjusted daily returns are obtained as the residuals from a regression of daily bond excess return on returns from the aggregate Treasury market and its two lags; three-factor-adjusted daily returns are obtained as the residuals from a regression of daily bond excess return on returns from the aggregate Treasury market, investment-grade bonds, junk bonds, and their two lags. Ownership is the proportion of total market value of a Treasury that is held by bond funds. Time-to-maturity is the years between the quarter-end and maturity date. Coupon Rate is the coupon rate expressed as a percentage. On-the-run is a dummy variable that equals one if a Treasury is the most recently issued Treasury of a particular maturity, and zero otherwise. Log(Size) is the logarithm of the total amount outstanding (face value, in millions of USD). Bid-ask Spread is the difference between ask price and bid price. All independent variables (except for the On-the-run dummy) are winsorized at the 1st and 99th percentiles. Heteroscedasticity and auto-correlation-consistent Newey-West t-statistics are reported in parentheses.

*

p < .1;

**

p < .05;

***

p < .01. The sample period is from 2002Q4 through 2021Q4.

Table 3
Open in new tab

Bond fund ownership and U.S. Treasury return volatility

DepVar:Volatility (in %)  
Market-adjusted returns
Three-factor-adjusted returns
(1)(2)(3)(4)(5)(6)
Ownership0.053**0.080***0.070***0.058**0.082***0.071***
(2.2)(3.5)(3.7)(2.4)(3.6)(3.8)
Time-to-maturity0.007***0.007***0.008***0.006***0.006***0.007***
(11.0)(10.9)(12.2)(11.1)(10.9)(12.2)
Coupon Rate–0.002***–0.002***–0.002***–0.001***
(–4.8)(–3.1)(–4.5)(–2.8)
On-the-run–0.002**–0.004***–0.002**–0.003***
(–2.4)(–4.2)(–2.2)(–4.2)
Log(Size)0.0010.001
(1.0)(1.3)
Bid-ask Spread–0.345***–0.314***
(–5.1)(–5.0)
# of Obs17,72017,72017,72017,72017,72017,720
DepVar:Volatility (in %)  
Market-adjusted returns
Three-factor-adjusted returns
(1)(2)(3)(4)(5)(6)
Ownership0.053**0.080***0.070***0.058**0.082***0.071***
(2.2)(3.5)(3.7)(2.4)(3.6)(3.8)
Time-to-maturity0.007***0.007***0.008***0.006***0.006***0.007***
(11.0)(10.9)(12.2)(11.1)(10.9)(12.2)
Coupon Rate–0.002***–0.002***–0.002***–0.001***
(–4.8)(–3.1)(–4.5)(–2.8)
On-the-run–0.002**–0.004***–0.002**–0.003***
(–2.4)(–4.2)(–2.2)(–4.2)
Log(Size)0.0010.001
(1.0)(1.3)
Bid-ask Spread–0.345***–0.314***
(–5.1)(–5.0)
# of Obs17,72017,72017,72017,72017,72017,720

This table reports the results from Fama-MacBeth regressions of U.S. Treasury excess return volatility in quarter q on its bond fund ownership in quarter q—1. Volatility (in %) is the standard deviation (in percentage) of the daily risk-adjusted returns in a quarter. We consider two ways to compute risk-adjusted returns: market-adjusted and three-factor-adjusted. Market-adjusted daily returns are obtained as the residuals from a regression of daily bond excess return on returns from the aggregate Treasury market and its two lags; three-factor-adjusted daily returns are obtained as the residuals from a regression of daily bond excess return on returns from the aggregate Treasury market, investment-grade bonds, junk bonds, and their two lags. Ownership is the proportion of total market value of a Treasury that is held by bond funds. Time-to-maturity is the years between the quarter-end and maturity date. Coupon Rate is the coupon rate expressed as a percentage. On-the-run is a dummy variable that equals one if a Treasury is the most recently issued Treasury of a particular maturity, and zero otherwise. Log(Size) is the logarithm of the total amount outstanding (face value, in millions of USD). Bid-ask Spread is the difference between ask price and bid price. All independent variables (except for the On-the-run dummy) are winsorized at the 1st and 99th percentiles. Heteroscedasticity and auto-correlation-consistent Newey-West t-statistics are reported in parentheses.

*

p < .1;

**

p < .05;

***

p < .01. The sample period is from 2002Q4 through 2021Q4.

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