liquidity preference

liquidity preference
(1) A desire among some holders of financial instruments to keep some or all of their funds in liquid instruments, that is, instruments that either mature in a short period of time or that can be readily sold with small risk of loss.
(2) A theory that attempts to explain the shape of yield curves. Under the liquidity preference hypothesis, the shape of yield curves is determined by the collective expectations of investors (the expectations hypothesis and implied forward rates) but with an upward bias at least for short- term rates caused by investors' preferences for liquidity. American Banker Glossary

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liquidity preference liquidity preference preference

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liquidity preference UK US noun [U]
ECONOMICS the fact that people, for example people who are making investments, prefer to have cash, or assets that can be quickly exchanged for cash: »

Keynes developed the theory of liquidity preference as a means of explaining the functioning of the financial system.

Financial and business terms. 2012.

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