New Findings from University of Virginia in Investment Provides New Insights (Central Bank-driven Mispricing): Investment

2025 APR 04 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- A new study on Investment is now available. According to news reporting originating in Charlottesville, Virginia, by NewsRx journalists, research stated, “We explore whether Quantitative Easing (QE) negatively affected the functioning of the treasury market. Focusing on the arbitrage between European sovereign bonds and their futures contracts, we show that the scarcity of treasuries created by QE led to a disconnect between the prices of identical assets.”

The news reporters obtained a quote from the research from the University of Virginia, “We identify three channels: reduced bond market liquidity, increased funding costs in the repo market, and a higher cost of carry. A change in a policy instrument allows us to identify scarcity as the main driver and rule out alternatives, such as balance sheet costs.”

According to the news reporters, the research concluded: “Our results extend to other arbitrage relations involving treasuries.”

This research has been peer-reviewed.

For more information on this research see: Central Bank-driven Mispricing. Journal of Financial Economics, 2025;166. Journal of Financial Economics can be contacted at: Elsevier Science Sa, PO Box 564, 1001 Lausanne, Switzerland. (Elsevier - www.elsevier.com; Journal of Financial Economics - http://www.journals.elsevier.com/journal-of-financial-economics/)

Our news correspondents report that additional information may be obtained by contacting Davide Tomio, University of Virginia, Darden School of Business, 100 Darden Blvd, Charlottesville, VA 22903, United States. Additional authors for this research include Loriana Pelizzon and Marti G. Subrahmanyam.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.jfineco.2025.104004. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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