The Turn of the Year in Money Markets: Tests of the Risk‐Shifting Window Dressing and Preferred Habitat Hypotheses
- 1 July 2005
- journal article
- research article
- Published by University of Chicago Press in The Journal of Business
- Vol. 78 (4) , 1337-1364
- https://doi.org/10.1086/430862
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.Keywords
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