(Presentation Slides) Dash for Cash: Monthly Market Impact of Institutional Liquidity Needs

43 Pages Posted: 31 Mar 2019

See all articles by Erkko Etula

Erkko Etula

Independent

Kalle Rinne

Universite du Luxembourg - Department of Finance

Matti Suominen

Aalto University School of Business

Lauri Vaittinen

Independent

Date Written: February 23, 2019

Abstract

Presentation slides for "Dash for Cash: Monthly Market Impact of Institutional Liquidity Needs", available at: https://ssrn.com/abstract=2528692. In this paper, we present broad-based evidence that the monthly payment cycle induces systematic return patterns in liquid markets around the globe. First, we document temporary increases in the costs of debt and equity capital that coincide with key dates associated with month-end cash needs. Second, we present direct and indirect evidence on the role of institutions in the genesis of these patterns and derive estimates of the associated costs borne by market participants. Finally, we investigate the limits to arbitrage that prevent markets from functioning efficiently. Our results indicate that many investors and their agents, including mutual funds, suffer from liquidity-related trading.

Keywords: asset pricing, limits of arbitrage, mutual funds, short-term reversals, turn of the month effect

JEL Classification: G10, G12, G13

Suggested Citation

Etula, Erkko and Rinne, Kalle and Suominen, Matti and Vaittinen, Lauri Tapani, (Presentation Slides) Dash for Cash: Monthly Market Impact of Institutional Liquidity Needs (February 23, 2019). Available at SSRN: https://ssrn.com/abstract=3340581 or http://dx.doi.org/10.2139/ssrn.3340581

Erkko Etula

Independent ( email )

Kalle Rinne

Universite du Luxembourg - Department of Finance ( email )

L-1511 Luxembourg
Luxembourg

HOME PAGE: http://https://sites.google.com/view/kallerinne/home

Matti Suominen (Contact Author)

Aalto University School of Business ( email )

PO Box 1210
FI-00101 Helsinki
Finland
+358-50-5245678 (Phone)

Lauri Tapani Vaittinen

Independent ( email )

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