On a Preferred Habitat for Liquidity at the Turn-of-the-Year: Evidence from the Term-Repo Market

Mark D. Griffiths, Drew B. Winters

Research output: Contribution to journalArticlepeer-review

27 Scopus citations

Abstract

In this article, we document a preference for liquidity at the year-end in the brokered market for general-collateral term-repurchase agreements. Our tests indicate significant increases in the repo rates for one-week through one-month term instruments when the maturities span the turn-of-the-year. We show that the results cannot be consistent with window dressing or with the argument that investors in this market tilt their portfolios away from riskier assets at the year-end. Our results suggest a generalized liquidity premium at year-end that could also explain the survival of the turn-of-the-year effect in equities. This desire for liquidity could be due to perceived risk, but since it appears in short-term general-collateral government repos, it seems more likely attributable to year-end payment patterns.

Original languageEnglish
Pages (from-to)21-38
Number of pages18
JournalJournal of Financial Services Research
Volume12
Issue number1
DOIs
StatePublished - 1997

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