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The Turn of the Year in Money Markets: Tests of the Risk-Shifting Window Dressing and Preferred Habitat Hypotheses

  • Mark D. Griffiths

    (Richard T. Farmer School of Business, Miami University)

  • Drew B. Winters

    (Rawls College of Business, Texas Tech University)

Registered author(s):

    Musto (1997) identifies a turn-of-the-year effect in the commercial paper market and offers risk-shifting window dressing as an explanation. We revisit this market with different methods and find strong evidence rejecting the risk-shifting hypothesis. We extend our analysis to other private-issue money market instruments and find similar results. We find further corroborating evidence in the 1-month T-bill market and aggregate demand deposit data. Our results are consistent with a year-end preferred habitat for liquidity associated with year-end cash flow obligations.

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    File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?JB780407
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    Article provided by University of Chicago Press in its journal Journal of Business.

    Volume (Year): 78 (2005)
    Issue (Month): 4 (July)
    Pages: 1337-1364

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    Handle: RePEc:ucp:jnlbus:v:78:y:2005:i:4:p:1337-1364
    Contact details of provider: Web page: http://www.journals.uchicago.edu/JB/

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