The ostrich effect in fixed income markets

There is a persistent gap between the returns of certificates of deposit and treasury bills that cannot be explained risk and liquidity. Investors are sacrificing returns to not receive information, which is a likely explanation for this anomaly. I develop a methodology that controls for monetary policy and focuses on the difference between these two instruments at 6 different sizes and maturities. It identifies market movements in correlation with uncertainty on the financial market, which would be supportive of an ostrich effect. I do not find enough evidence to support the theory that investors behave like ostriches in times of uncertainty, namely, avoiding information that might be unsettling. Expected stock market volatility had a reverse causal effect on the illiquidity premium, not the other way around like the ostrich effect would predict.