Title

Preferred habitat for liquidity in international short-term interest rates

Authors

Authors

V. Kotomin; S. D. Smith;D. B. Winters

Comments

Authors: contact us about adding a copy of your work at STARS@ucf.edu

Abbreviated Journal Title

J. Bank Financ.

Keywords

preferred habitat; international interest rates; LIBOR; BEHAVIOR; MARKET; END; Business, Finance; Economics

Abstract

Risk-shifting window dressing and a preferred habitat for liquidity have been offered as possible explanations as to why US money market rates are higher before the year-end than afterwards. The two hypotheses differ in the timing of the rate decline at the year-end and the evidence on the timing of the decline supports the preferred habitat hypothesis in US money markets. This paper extends this line of research to the behavior of international short-term interest rates at year-ends and quarter-ends using London interbank offer rates (LIBOR) for 11 different currencies. The results suggest that the behavior of LIBOR for five currencies: the US Dollar, Euro, Japanese Yen, Swiss Franc, and German Mark is consistent with year-end or quarter-end preferred habitats for liquidity. Other currencies do not demonstrate consistently distinct patterns in turn-of-the-year and turn-of-the-quarter yields. None of the results provides any support for risk-shifting window dressing. (c) 2007 Elsevier B.V. All rights reserved.

Journal Title

Journal of Banking & Finance

Volume

32

Issue/Number

2

Publication Date

1-1-2008

Document Type

Article

Language

English

First Page

240

Last Page

250

WOS Identifier

WOS:000254137400006

ISSN

0378-4266

Share

COinS