Mark's slide P7.47 on Liquidity risk posed the question -- the widening spread between on-the-run vs off-the-run treasuries invite an arbitrage strategy. The excess return is often considered alpha. Maybe it is actually beta, because this excess return is not free lunch. Instead it is a reward for taking on liquidity risk. Off the run is less liquid when you are forced to sell it before maturity. It's also less valuable as a collateral.
Bottom line - Any excess return that's associated with some risk is beta not alpha.
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