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Portfolio maturity choice of Australian cash management trusts

  • Davis, Kevin
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    Money Market Mutual Funds, known in Australia as Cash Management Trusts (CMTs), provide potential benefits for retail investors from pooling of funds and superior portfolio (maturity) management skills. The average maturity of CMT assets exhibits significant variation both cross sectionally and over time, but there is significant correlation between the asset maturities of different CMTs. These variations could reflect decisions about optimal asset maturity by CMT management, given their expectations of future interest rate movements. This paper examines (and rejects) the hypothesis that CMT management has superior interest rate forecasting ability by testing whether asset maturity of CMTs provides any information about future interest rate movements. The correlation between CMT maturity decisions appears to reflect the tendency of some CMTs to adjust maturity in response to current changes in market interest rates.

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    File URL: http://www.sciencedirect.com/science/article/B6W4W-4NB99MN-1/2/1b2bb1525492efe05491d2ff468d3792
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    Article provided by Elsevier in its journal International Review of Financial Analysis.

    Volume (Year): 17 (2008)
    Issue (Month): 5 (December)
    Pages: 1173-1185

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    Handle: RePEc:eee:finana:v:17:y:2008:i:5:p:1173-1185
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620166

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    1. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
    2. DeGennaro, Ramon P & Domian, Dale L, 1996. "Market Efficiency and Money Market Fund Portfolio Managers: Beliefs versus Reality," The Financial Review, Eastern Finance Association, vol. 31(2), pages 453-74, May.
    3. Bahmani-Oskooee, Mohsen, 1996. "Money market mutual fund maturity and interest rates: A note," International Review of Economics & Finance, Elsevier, vol. 5(1), pages 101-108.
    4. Domian, Dale L, 1992. "Money Market Mutual Fund Maturity and Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(4), pages 519-27, November.
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