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Interest-rate and calendar-time effects in money market fund and bank deposit cash flows

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  • Vladimir Kotomin
  • Stanley Smith
  • Drew Winters

Abstract

We examine the sensitivities of aggregate balances of retail and institutional money market funds (MMFs) and their potential substitutes, bank deposits, to changes in short-term interest rates while controlling for calendar-time effects. We find that institutional MMF and time deposit cash flows are sensitive to recent changes in short-term interest rates. Institutional MMF investors appear to take advantage of arbitrage opportunities created by MMFs using the amortized cost technique. Retail MMF investors are much less responsive to changes in interest rates. Copyright Springer Science+Business Media, LLC 2014

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  • Vladimir Kotomin & Stanley Smith & Drew Winters, 2014. "Interest-rate and calendar-time effects in money market fund and bank deposit cash flows," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 38(1), pages 84-95, January.
    • Handle: RePEc:spr:jecfin:v:38:y:2014:i:1:p:84-95
    DOI: 10.1007/s12197-011-9210-y
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    References listed on IDEAS

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    6. Mark D. Griffiths & Drew B. Winters, 2005. "The Turn of the Year in Money Markets: Tests of the Risk-Shifting Window Dressing and Preferred Habitat Hypotheses," The Journal of Business, University of Chicago Press, vol. 78(4), pages 1337-1364, July.
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    9. Vladimir Kotomin & Drew Winters, 2006. "Quarter-End Effects in Banks: Preferred Habitat or Window Dressing?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 29(1), pages 61-82, February.
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    Cited by:

    1. Cai, Yu & Wang, Qing, 2022. "Money funds manage returns," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).
    2. Vladimir Kotomin, 2021. "The clientele effect around the turn of the year: evidence from the bond markets," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(4), pages 637-653, October.

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