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

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  • Hao-Chen Liu

    (College of Charleston, USA)

  • Mark David Witte

    (College of Charleston, USA)

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.

Suggested Citation

  • Hao-Chen Liu & Mark David Witte, 2019. "Preferred Habitat, Window Dressing, or Both? Evidence From Foreign Exchange Swaps in Taiwan," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 22(03), pages 1-20, September.
    • Handle: RePEc:wsi:rpbfmp:v:22:y:2019:i:03:n:s0219091519500152
    DOI: 10.1142/S0219091519500152
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    References listed on IDEAS

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    7. Ogden, Joseph P., 1987. "The End of the Month as a Preferred Habitat: A Test of Operational Efficiency in the Money Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(3), pages 329-343, September.
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