The Turn of the Year in Money Markets: Tests of the Risk-Shifting Window Dressing and Preferred Habitat Hypotheses

Mark D. Griffiths and Drew B. Winters
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Mark D. Griffiths: Richard T. Farmer School of Business, Miami University
Drew B. Winters: Rawls College of Business, Texas Tech University

The Journal of Business, 2005, vol. 78, issue 4, 1337-1364

Abstract: Musto (1997) identifies a turn-of-the-year effect in the commercial paper market and offers risk-shifting window dressing as an explanation. We revisit this market with different methods and find strong evidence rejecting the risk-shifting hypothesis. We extend our analysis to other private-issue money market instruments and find similar results. We find further corroborating evidence in the 1-month T-bill market and aggregate demand deposit data. Our results are consistent with a year-end preferred habitat for liquidity associated with year-end cash flow obligations.

Date: 2005
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Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:78:y:2005:i:4:p:1337-1364

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