Risk-return tradeoffs from investing in the Australian cash management industry

Jenny Diggle and Robert Brooks

Applied Financial Economics Letters, 2006, vol. 2, issue 3, pages 147-150

Abstract: This study analyses the use of cash as an asset class by professional funds managers and compares the returns generated over time by these fund managers with a direct investment in three 'risk free’ interest rate securities -- overnight cash, a 180 day bank bill and a medium term Commonwealth Government bond -- over the period January 1993 to July 1999. The findings show that wholesale investors are obtaining lower risk but at some cost to returns. In contrast retail investors appear to obtain both higher return and lower risk relative to traditional banking products.

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