| DepVar: . | Market-adjusted returns . | Three-factor-adjusted returns . | ||||||
|---|---|---|---|---|---|---|---|---|
| . | Corr_all . | Corr_down . | Corr_up . | Down-minus-up . | Corr_all . | Corr_down . | Corr_up . | Down-minus-up . |
| . | (1) . | (2) . | (3) . | (4) . | (5) . | (6) . | (7) . | (8) . |
| Common Ownership | 3.252*** | 3.338*** | 3.150*** | 0.188** | 3.224*** | 3.317*** | 3.128*** | 0.188** |
| (10.7) | (11.3) | (10.0) | (2.4) | (10.4) | (10.9) | (9.8) | (2.3) | |
| Time-to-maturity Difference | –0.052*** | –0.052*** | –0.052*** | –0.000 | –0.051*** | –0.051*** | –0.051*** | –0.000 |
| (–35.0) | (–35.0) | (–33.0) | (–0.1) | (–31.7) | (–31.1) | (–29.9) | (–0.5) | |
| Coupon Rate Difference | –0.025*** | –0.024*** | –0.026*** | 0.001 | –0.025*** | –0.024*** | –0.026*** | 0.002 |
| (–5.5) | (–5.2) | (–5.7) | (1.0) | (–5.5) | (–5.1) | (–5.8) | (1.6) | |
| On-the-run Difference | 0.031*** | 0.029*** | 0.031*** | –0.002 | 0.031*** | 0.030*** | 0.031*** | –0.001 |
| (5.0) | (4.6) | (5.3) | (–1.2) | (5.0) | (4.8) | (5.1) | (–0.9) | |
| Log(Size) Difference | –0.006 | –0.004 | –0.007 | 0.003 | –0.005 | –0.003 | –0.006 | 0.003 |
| (–0.4) | (–0.3) | (–0.5) | (0.9) | (–0.3) | (–0.2) | (–0.4) | (0.8) | |
| Bid-ask Spread Difference | –4.836*** | –4.909*** | –4.734*** | –0.175 | –4.735*** | –4.842*** | –4.585*** | –0.257 |
| (–4.6) | (–4.7) | (–4.6) | (–0.6) | (–4.6) | (–4.6) | (–4.5) | (–1.1) | |
| # of Obs | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 |
| DepVar: . | Market-adjusted returns . | Three-factor-adjusted returns . | ||||||
|---|---|---|---|---|---|---|---|---|
| . | Corr_all . | Corr_down . | Corr_up . | Down-minus-up . | Corr_all . | Corr_down . | Corr_up . | Down-minus-up . |
| . | (1) . | (2) . | (3) . | (4) . | (5) . | (6) . | (7) . | (8) . |
| Common Ownership | 3.252*** | 3.338*** | 3.150*** | 0.188** | 3.224*** | 3.317*** | 3.128*** | 0.188** |
| (10.7) | (11.3) | (10.0) | (2.4) | (10.4) | (10.9) | (9.8) | (2.3) | |
| Time-to-maturity Difference | –0.052*** | –0.052*** | –0.052*** | –0.000 | –0.051*** | –0.051*** | –0.051*** | –0.000 |
| (–35.0) | (–35.0) | (–33.0) | (–0.1) | (–31.7) | (–31.1) | (–29.9) | (–0.5) | |
| Coupon Rate Difference | –0.025*** | –0.024*** | –0.026*** | 0.001 | –0.025*** | –0.024*** | –0.026*** | 0.002 |
| (–5.5) | (–5.2) | (–5.7) | (1.0) | (–5.5) | (–5.1) | (–5.8) | (1.6) | |
| On-the-run Difference | 0.031*** | 0.029*** | 0.031*** | –0.002 | 0.031*** | 0.030*** | 0.031*** | –0.001 |
| (5.0) | (4.6) | (5.3) | (–1.2) | (5.0) | (4.8) | (5.1) | (–0.9) | |
| Log(Size) Difference | –0.006 | –0.004 | –0.007 | 0.003 | –0.005 | –0.003 | –0.006 | 0.003 |
| (–0.4) | (–0.3) | (–0.5) | (0.9) | (–0.3) | (–0.2) | (–0.4) | (0.8) | |
| Bid-ask Spread Difference | –4.836*** | –4.909*** | –4.734*** | –0.175 | –4.735*** | –4.842*** | –4.585*** | –0.257 |
| (–4.6) | (–4.7) | (–4.6) | (–0.6) | (–4.6) | (–4.6) | (–4.5) | (–1.1) | |
| # of Obs | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 |
This table reports the results from Fama-MacBeth regressions of U.S. Treasury excess return comovement in quarter q on common ownership in quarter q—1. Corr_all is the excess return correlation between two securities in a quarter. The excess return correlation is computed as the pairwise correlation of daily risk-adjusted returns for a pair of securities. 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. We further sort all trading days in a quarter into two equal groups (downside and upside market days) based on the aggregate Treasury market returns, and Corr_up and Corr_down are the excess return correlation between two securities during downside and upside market days, respectively. Down-minus-up is the difference between Corr_down and Corr_up. All these pairwise correlations are constructed using market-adjusted returns and three-factor-adjusted returns. Common Ownership is the proportion of total market value of a Treasury pair held by funds holding the pair of Treasuries. Time-to-maturity Difference is the absolute difference between two securities’ years-to-maturity. Coupon Rate Difference is the absolute difference between two securities’ coupon rates. On-the-run Difference is the absolute difference between two Treasuries’ on-the-run status for a pair of Treasuries, where 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) Difference is the absolute difference between two Treasuries’ logarithm of total amount outstanding. Bid-ask Spread Difference is the absolute difference between two Treasuries’ bid-ask spread. All independent variables (except for the On-the-Run Difference dummy) are winsorized at the 1st and 99th percentiles. Heteroscedasticity and auto-correlation-consistent Newey-West (1987) t-statistics are reported in parentheses.
p < .1;
p < .05;
p < .01. The sample period is from 2002Q4 through 2021Q4.
| DepVar: . | Market-adjusted returns . | Three-factor-adjusted returns . | ||||||
|---|---|---|---|---|---|---|---|---|
| . | Corr_all . | Corr_down . | Corr_up . | Down-minus-up . | Corr_all . | Corr_down . | Corr_up . | Down-minus-up . |
| . | (1) . | (2) . | (3) . | (4) . | (5) . | (6) . | (7) . | (8) . |
| Common Ownership | 3.252*** | 3.338*** | 3.150*** | 0.188** | 3.224*** | 3.317*** | 3.128*** | 0.188** |
| (10.7) | (11.3) | (10.0) | (2.4) | (10.4) | (10.9) | (9.8) | (2.3) | |
| Time-to-maturity Difference | –0.052*** | –0.052*** | –0.052*** | –0.000 | –0.051*** | –0.051*** | –0.051*** | –0.000 |
| (–35.0) | (–35.0) | (–33.0) | (–0.1) | (–31.7) | (–31.1) | (–29.9) | (–0.5) | |
| Coupon Rate Difference | –0.025*** | –0.024*** | –0.026*** | 0.001 | –0.025*** | –0.024*** | –0.026*** | 0.002 |
| (–5.5) | (–5.2) | (–5.7) | (1.0) | (–5.5) | (–5.1) | (–5.8) | (1.6) | |
| On-the-run Difference | 0.031*** | 0.029*** | 0.031*** | –0.002 | 0.031*** | 0.030*** | 0.031*** | –0.001 |
| (5.0) | (4.6) | (5.3) | (–1.2) | (5.0) | (4.8) | (5.1) | (–0.9) | |
| Log(Size) Difference | –0.006 | –0.004 | –0.007 | 0.003 | –0.005 | –0.003 | –0.006 | 0.003 |
| (–0.4) | (–0.3) | (–0.5) | (0.9) | (–0.3) | (–0.2) | (–0.4) | (0.8) | |
| Bid-ask Spread Difference | –4.836*** | –4.909*** | –4.734*** | –0.175 | –4.735*** | –4.842*** | –4.585*** | –0.257 |
| (–4.6) | (–4.7) | (–4.6) | (–0.6) | (–4.6) | (–4.6) | (–4.5) | (–1.1) | |
| # of Obs | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 |
| DepVar: . | Market-adjusted returns . | Three-factor-adjusted returns . | ||||||
|---|---|---|---|---|---|---|---|---|
| . | Corr_all . | Corr_down . | Corr_up . | Down-minus-up . | Corr_all . | Corr_down . | Corr_up . | Down-minus-up . |
| . | (1) . | (2) . | (3) . | (4) . | (5) . | (6) . | (7) . | (8) . |
| Common Ownership | 3.252*** | 3.338*** | 3.150*** | 0.188** | 3.224*** | 3.317*** | 3.128*** | 0.188** |
| (10.7) | (11.3) | (10.0) | (2.4) | (10.4) | (10.9) | (9.8) | (2.3) | |
| Time-to-maturity Difference | –0.052*** | –0.052*** | –0.052*** | –0.000 | –0.051*** | –0.051*** | –0.051*** | –0.000 |
| (–35.0) | (–35.0) | (–33.0) | (–0.1) | (–31.7) | (–31.1) | (–29.9) | (–0.5) | |
| Coupon Rate Difference | –0.025*** | –0.024*** | –0.026*** | 0.001 | –0.025*** | –0.024*** | –0.026*** | 0.002 |
| (–5.5) | (–5.2) | (–5.7) | (1.0) | (–5.5) | (–5.1) | (–5.8) | (1.6) | |
| On-the-run Difference | 0.031*** | 0.029*** | 0.031*** | –0.002 | 0.031*** | 0.030*** | 0.031*** | –0.001 |
| (5.0) | (4.6) | (5.3) | (–1.2) | (5.0) | (4.8) | (5.1) | (–0.9) | |
| Log(Size) Difference | –0.006 | –0.004 | –0.007 | 0.003 | –0.005 | –0.003 | –0.006 | 0.003 |
| (–0.4) | (–0.3) | (–0.5) | (0.9) | (–0.3) | (–0.2) | (–0.4) | (0.8) | |
| Bid-ask Spread Difference | –4.836*** | –4.909*** | –4.734*** | –0.175 | –4.735*** | –4.842*** | –4.585*** | –0.257 |
| (–4.6) | (–4.7) | (–4.6) | (–0.6) | (–4.6) | (–4.6) | (–4.5) | (–1.1) | |
| # of Obs | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 | 2,040,889 |
This table reports the results from Fama-MacBeth regressions of U.S. Treasury excess return comovement in quarter q on common ownership in quarter q—1. Corr_all is the excess return correlation between two securities in a quarter. The excess return correlation is computed as the pairwise correlation of daily risk-adjusted returns for a pair of securities. 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. We further sort all trading days in a quarter into two equal groups (downside and upside market days) based on the aggregate Treasury market returns, and Corr_up and Corr_down are the excess return correlation between two securities during downside and upside market days, respectively. Down-minus-up is the difference between Corr_down and Corr_up. All these pairwise correlations are constructed using market-adjusted returns and three-factor-adjusted returns. Common Ownership is the proportion of total market value of a Treasury pair held by funds holding the pair of Treasuries. Time-to-maturity Difference is the absolute difference between two securities’ years-to-maturity. Coupon Rate Difference is the absolute difference between two securities’ coupon rates. On-the-run Difference is the absolute difference between two Treasuries’ on-the-run status for a pair of Treasuries, where 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) Difference is the absolute difference between two Treasuries’ logarithm of total amount outstanding. Bid-ask Spread Difference is the absolute difference between two Treasuries’ bid-ask spread. All independent variables (except for the On-the-Run Difference dummy) are winsorized at the 1st and 99th percentiles. Heteroscedasticity and auto-correlation-consistent Newey-West (1987) t-statistics are reported in parentheses.
p < .1;
p < .05;
p < .01. The sample period is from 2002Q4 through 2021Q4.
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