Journal of Financial Services Research

, Volume 12, Issue 1, pp 21–38

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

  • Mark D Griffiths
  • Drew B Winters
Article

DOI: 10.1023/A:1007961510853

Cite this article as:
Griffiths, M.D. & Winters, D.B. Journal of Financial Services Research (1997) 12: 21. doi:10.1023/A:1007961510853
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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.

Copyright information

© Kluwer Academic Publishers 1997

Authors and Affiliations

  • Mark D Griffiths
    • 1
  • Drew B Winters
    • 2
  1. 1.World BusinessAmerican Graduate School of International ManagementGlendale
  2. 2.College of Business Administration, Department of Marketing and FinanceUniversity of Southern MississippiHattiesburg