Riding the bill curve - This effective strategy is as simple as it is well-known

The authors examine the effectiveness of "riding the bill curve" using a co mprehensive sample of U.S. Treasury bills over a recent ten-year period. Th e results suggest that riding the bill curve consistently enhances returns over a buy-and-hold strategy on average. Although the additional return is associated with higher risk, the reward is sufficient for all but the most risk-averse investors. The riding strategy's performance deteriorated subst antially during the Federal Reserve tightening cycle of 1994-1995. Riding t he bill curve, however, is generally preferable to buying and holding relat ively expensive "quarter-end" or "tax" bills.