The turn of the year in money markets: Tests of the risk-shifting window dressing and preferred habitat hypotheses

Mark D. Griffiths, Drew B. Winters

Research output: Contribution to journalArticle

26 Scopus citations

Abstract

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.

Original languageEnglish
Pages (from-to)1337-1363
Number of pages27
JournalJournal of Business
Volume78
Issue number4
DOIs
StatePublished - Jul 2005

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