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Seasonal Patterns in Money Market Mutual Funds

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  • Farinella, Joseph A
  • Koch, Timothy W
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    Abstract

    This study analyzes seasonal patterns in tax-exempt and taxable money market mutual fund yields. We document a significant increase in tax-exempt and taxable yields during the last three weeks of December, followed by a significant decrease in yields during the first three weeks of January. The yield changes are associated with a corresponding outflow of fund assets at the end of the year and inflow of assets in the beginning of the year. We also find that tax-exempt yields change systematically around the 15th of April, June and September, which are key individual income tax dates. These results are consistent with liquidity effects associated with year-end wages, dividends, and bonus payments and tax-effects. We also find that institution window dressing contributes to the year-end movements in taxable and tax-exempt fund yields. One implication is that municipalities planning to issue short-term notes and investors in these funds can time their actions to take advantage of these systematic yield changes. Copyright 2000 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Review of Quantitative Finance and Accounting.

    Volume (Year): 14 (2000)
    Issue (Month): 3 (May)
    Pages: 261-76

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    Handle: RePEc:kap:rqfnac:v:14:y:2000:i:3:p:261-76

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    Web page: http://springerlink.metapress.com/link.asp?id=102990

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    Cited by:
    1. G. Koppenhaver & Travis Sapp, 2005. "Money Funds or Markets? Valuing Intermediary Services," Journal of Financial Services Research, Springer, vol. 27(1), pages 51-76, February.

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