Preferred Habitat, Window Dressing, or Both? Evidence From Foreign Exchange Swaps in Taiwan

Hao-Chen Liu and Mark Witte
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Hao-Chen Liu: College of Charleston, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2019, vol. 22, issue 03, 1-20

Abstract: In this paper, we use a unique dataset to examine the cause of return irregularity in financial markets around the end of the year. Year-end return irregularities are often attributed to either window-dressing or preferred habitat. We study year-end return irregularities in the foreign exchange swap market. We find that the return of a contract ending before the end of the year is lower than the return of a contract ending after the beginning of the year. The results support the existence of the preferred habitat and provide some evidence of window dressing in foreign exchange swaps.

Keywords: Exchange rates; window-dressing; preferred habitat; quarter-end; foreign exchange swaps (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1142/S0219091519500152

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