On a preferred habitat for liquidity at the turn-of-the-year: Evidence from the term-repo market
Finance, Real Estate, and Business Law
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 rum-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.
JOURNAL OF FINANCIAL SERVICES RESEARCH
(1997). On a preferred habitat for liquidity at the turn-of-the-year: Evidence from the term-repo market. JOURNAL OF FINANCIAL SERVICES RESEARCH, 12(1), 21-38.
Available at: http://aquila.usm.edu/fac_pubs/5414