Title

Interest-rate and Calendar-time Effects in Money Market Fund and Bank Deposit Cash Flows

Authors

Vladimir Kotomin, Illinois State UniversityFollow
Stanley D. Smith, University of Central Florida
Drew B. Winters, Texas Tech University

Document Type

Article

Publication Date

2014

Keywords

Money market funds, Amortized cost, Preferred habitat for liquidity

Abstract

We examine the sensitivities of aggregate balances of retail and institutional money market funds (MMFs) and their potential substitutes, bank deposits, to changes in short-term interest rates while controlling for calendar-time effects. We find that institutional MMF and time deposit cash flows are sensitive to recent changes in short-term interest rates. Institutional MMF investors appear to take advantage of arbitrage opportunities created by MMFs using the amortized cost technique. Retail MMF investors are much less responsive to changes in interest rates.

Comments

This article was originally published in Journal of Economics and Finance 38, no. 1 (2014): 84-95.

Recommended Citation

Kotomin, Vladimir; Smith, Stanley D.; and Winters, Drew B., "Interest-rate and Calendar-time Effects in Money Market Fund and Bank Deposit Cash Flows" (2014). Faculty Publications - Finance, Insurance, and Law. 7.
https://ir.library.illinoisstate.edu/fpfil/7