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Market Efficiency and Money Market Fund Portfolio Managers: Beliefs Versus Reality

Posted: 26 Feb 2003  

Ramon P. DeGennaro

University of Tennessee, Knoxville - Department of Finance

Dale L. Domian

York University - School of Administrative Studies

Multiple version iconThere are 2 versions of this paper

Abstract

This paper develops two models of the money market
mutual fund maturity decision. The first assumes that
markets are efficient but that transactions are costly. The
second model relies on a survey of fund managers to select
variables that might permit exploiting perceived
profit opportunities. Empirical tests provide strong support
for the former model, but none for the latter. This
can be interpreted as meaning that although managers
may believe that financial markets are inefficient, margins
are too small and competition too fierce for them to
act aggressively on those beliefs. Any actions they do
take to exploit alleged inefficiencies are not detectable in
the data. In addition, the study finds that managers in
the aggregate have no special ability to adjust their funds'
maturity to capitalize on interest-rate changes.

JEL Classification: G1, G2, G0, E4, D4, C5

Suggested Citation

DeGennaro, Ramon P. and Domian, Dale L., Market Efficiency and Money Market Fund Portfolio Managers: Beliefs Versus Reality. Financial Review, Vol. 31, May 1996. Available at SSRN: https://ssrn.com/abstract=371960

Ramon P. DeGennaro (Contact Author)

University of Tennessee, Knoxville - Department of Finance ( email )

423 Stokely Management Center
Knoxville, TN 37996
United States
865-974-1726 (Phone)
865-974-1716 (Fax)

Dale L. Domian

York University - School of Administrative Studies ( email )

Toronto, Ontario M3J 1P3
Canada
416-736-2100, x20009 (Phone)
416-736-5963 (Fax)

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