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Assessing Credit Risk in Money Market Fund Portfolios

Assessing Credit Risk in Money Market Fund Portfolios

This figure seeks to assess the effects of the 2010 reforms’ maturity and liquidity provisions on the credit risk in prime money market fund portfolios. To do this, we undertake panel data regressions of ELM on fund portfolio characteristics across all sample prime funds, analyzed monthly over the 2011-2012 period. Explanatory variables include a fund’s weekly liquid assets, LIQ, as defined under SEC Rule 2a-7, and a fund’s weighted average life, WAL. We also study the maturity profile of a fund’s “gov” and “nongov” investments, where “gov” investments include only treasury, agency, and repo securities collateralized by treasury and agency securities (GOVLIQ); meanwhile, “nongov” investments exclude these security types (NONGOVLIQ, and NONGOVWAL). To control for time-varying global financial risks (which likely affect the credit risks of prime funds generally), we include the average CDS premi- ums of banks in Europe, Japan, Australia/New Zealand, and the U.S., separately, in all regressions (not shown for brevity). We also control for (but do not show) the log of fund assets and the percentage of fund assets in institutional share classes. Finally, to treat the possible endogeneity discussed in footnote 20, we include (but do not show) a proxy for the measurement error in ELM in regressions (1)-(4). This proxy equals the residuals from a regression of ELM on ( r ¯ − r ¯ g ) . In column (5), the dependent variable
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The continuing foreclosure crisis: new institutions and risks

The continuing foreclosure crisis: new institutions and risks

One of the biggest genuine September surprises was the closing of the Reserve Primary money market mutual fund (MMMF) on September 16, 2008 as the result of a run on its funds. Ironically, Bruce Bent, who along with Henry B.R. Brown was a founder of the MMMF, was the Chairman and CEO of Reserve. Reserve violated one of the most basic principles established by Bent and Brown by holding higher yielding but riskier commercial paper or other short term funds. MMMFs were originally intended to hold short-term money market securities issued by the government to provide comparable returns to small savers on liquid funds. MMMFs hold high quality commercial paper but only in small and well–diversified amounts to enhance their yield, despite the risk. The Primary fund had held $785 million of Lehman commercial paper which was marked to zero after the failure of Lehman Brothers. Holding private assets, especially medium or long-term ones, was viewed as too risky for MMMFs. Even high quality commercial paper subjected funds to excessive risk and occasionally led to historic events called “breaking the buck” when a fund could not guarantee 100 percent of principal invested. Typically in those events, the owner of the fund would provide a bailout to insure that the fund could always pay out 100 percent of principal, because failure to do so would incur huge reputation loss and loss of deposits. Reportedly, the last time a firm broke the buck was in 1994. The run on the Reserve Primary fund reduced assets from $65 billion at the end of August 2008 to $23 billion at the end of the day on September 16. Other funds also saw runs and closed. Putnam Investments, for example, liquidated its $12 billion Prime Money Market Fund, selling the fund to Federated Investor’s Prime Obligation Fund. The run even triggered runs on bank deposits as far away as Hong Kong.
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Harnessing Whales:  The Role Of Shadow Price Disclosure In Money Market Mutual Fund Reform

Harnessing Whales: The Role Of Shadow Price Disclosure In Money Market Mutual Fund Reform

188 http://www.cluteinstitute.com/ 2013 The Clute Institute fund is required to take immediate measures such as liquidating the fund or allowing its share price to float with the NAV (Rule 2a-7(c)(8)(ii)(B)). Only when a money fund “breaks the buck” will investors be exposed to losses imbedded in the fund. Fortunately for investors, breaking the buck has been a historically rare event. Between the 1970’s and 2008, only one money market fund had ever broken the buck (Mamudi, 2008). Investors may have understandably assumed that money funds were a safe and liquid place to invest short-term funds. This effect may have been exacerbated by the propensity of fund sponsors to bail out their money funds in times of trouble. Moody’s Investors Services estimates that at least 146 funds received sponsor support of one kind or another between 1972 and 2007 (Shilling, 2010). In 2008, however, another fund broke the buck and that event had a broader impact beyond the fate of its investors. When the Reserve Primary Fund’s share price dropped below $0.995 in September 2008, due to its holdings in Lehman Brothers debt, the failure of the fund rippled through the entire short-term capital market. Money fund investors withdrew $310 billion from the industry in seven days (“Report of the President’s Working Group on Financial Markets”, n.d.). The Reserve Primary Fund was closed and investors eventually received approximately $0.99 per share as the fund was liquidated (Stempel, 2012).
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Three essays in asset management

Three essays in asset management

The concept of size and style rotation is prominent in the equity market and has attracted extensive research and study. More precisely, it is the potential profitability of size and style rotation strategies that has fascinated not only the researchers, but investors as well. Consistent style approach is often the preferred investment strategy with mutual funds and traditional asset managers. Although we can identify significant number of value, growth, large capitalisation and small capitalisation funds, there is extensive evidence which suggests that each of those styles does not persistently outperform the market or the remaining three styles. This implies that being style consistent is risky as it can lead to underperformance due to inevitable reversal in the performance of the selected style. Specifically, the existing literature suggests that better performance can be generated by applying style rotation between pairs of styles at the opposite end of the spectrum, namely: value vs. growth rotation and small vs. large rotation. However, there is no reason why an investor should switch from value to growth stock when the forecast suggests so, if large cap stocks are expected to perform better than both value and growth style. In other words, we believe that more profit potential lies in the multi-style rotation which is enabling investors to switch across all four styles. Arshanapalli, Switzer and Panju (2005) and Ahmed et al. (2002) show potential profits arising from multi-style rotation strategies opposed to single-style rotation strategies in the US market. Therefore, creating a strategy that will enable us to successfully switch from one style performing at its best in one period of time to another style expected to be the best performer in the next period, is of essence. Although there are a number of studies that provide evidence on the benefits and profitability of size and style rotation in particular, there are only a few that are concentrated on the UK financial market. Furthermore, much of equity style timing literature focuses on shifting between pairs of risky assets or between one risky and one riskless asset class, using a binomial approach. Our study differs from other literature on the UK markets in that it implements a multi-style rotation approach.
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INDIAN MUTUAL FUND MARKET: AN OVERVIEW

INDIAN MUTUAL FUND MARKET: AN OVERVIEW

factors like age, gender, marital status, level of market knowledge, educational qualification of retails investors and the number of dependents. Devasenathipathi, Saleendran and Shanmugasundaram (2007) in their study disclosed that 30% of the respondents in the sample group of 200 had awareness of mutual funds through consultant’s advisory services, 46% respondents in the age group of 25-35 years had a lot of interest and more investments in mutual funds and 31% of the respondents had maintained mutual fund investments to meet future expenses. The study also unfolded that dividend had been the most preferred investment option for the respondents and 49% of the respondents had preferred to invest in equity fund other than the debt and balanced fund. Shanmugsundaram and Balakrishnan (2011) analyzed the investor behaviour on result announcement. It was concluded that when the result announced by the company were better than expected, 38% of the respondents desired to invest more and 40% of the respondent desired to hold the securities and 22% of investor wished to book the profit. Research further concluded that maximum number of respondent fell in the age of 21-30 years category out of which 75% of the respondents fell in the income level of below Rs.3,50,000 and 50% of the respondent were below the income level of Rs.1,50,000. Singh, and Chander (2003), identified that estimation of risk and return, portfolio selection and NAV are important criteria for mutual fund appraisal. The ANOVA results concluded that occupational status and age had immaterial influence on the choice of scheme. The important factors in the selection of schemes for salaried and retired investors were attributed to the past track record, safety and future growth prospects. Investors also expected prompt service, reliable information and also repurchase facility from the companies. Majority of retail investors
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Analysis of the Goods Market and Money Market Equilibrium in a Developing Country

Analysis of the Goods Market and Money Market Equilibrium in a Developing Country

The relationship between interest rate, real money balances and real output may be explored in an IS-LM framework. The objective of this study is to explore the connection between real interest rate, GDP and real money balances. It also empirically tests for the nature and existence of the IS-LM framework in Ghana. Em- ploying a simple IS-LM framework, the Two Stage Least Squares (TSLS) estimation technique is used for the analysis. The main contribution of this paper is the use of a simultaneous equation framework to investigate in- terest rate and GDP growth determinants. This is imperative since interest rate is both an explanatory and an explained variable. The results indicated that real money balances exerted a negative but significant influence on real interest rate. The growth rate of GDP had a dominant influence on real interest rate. On the other hand, investment expenditure exerted significant and positive influence on GDP growth. Meanwhile, as informed by economic theory, interest rate changes had a negative and significant influence on GDP growth. The study re- commends the role of monetary policy and economic growth in exchange rate management. Also, policy focus should be on interest rate since interest rate is seen in this study as a stronger driver of economic growth in Ghana compared with investment expenditure.
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Analysis of Stock Screening Principles in Islamic Mutual Funds Industry

Analysis of Stock Screening Principles in Islamic Mutual Funds Industry

According to Islamic principles for investments in stocks, market price per share should be greater than net liquid assets per share. It may suggest that this principle restricts investments in the stock of liquid companies. Creditors prefer a favorable Current and Quick ratio but shareholders are not exactly happy when the company has immense liquidity. Excess liquidity implies the company has excess funds, but it has not invested them in its operations fully. There is a trade-off between profitability and liquidity companies have to make. Cash equivalents and marketable securities usually yield a return that is negative in real terms in most developing countries.
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Volatility and liquidity in the Italian money market

Volatility and liquidity in the Italian money market

During “ordinary” trading days, overnight interest rate volatility follows a slightly pronounced U-shaped pattern: it is higher early in the morning (with the exception of the first hour of negotiation, when many traders are not active), when the market reacts to news accumulated during non-trading hours, and late in the afternoon, when banks adjust their liquidity position to reach their end-of-day target. The increase during the last part of the market session is much larger at the end of the reserve period, when banks cannot defer the fulfilment of their reserve requirements.
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Deposit insurance and money market freezes

Deposit insurance and money market freezes

The role of the funding problems of traders and intermediaries in financial market freezes have also been analyzed with models from other traditions. Huang and Ratnovski (2008), for example, consider a setup in which the short-term wholesale funding of banks plays a disci- plinary role, like in Calomiris and Kahn (1991), and show that sudden refinancing problems may arise from the panic-like reaction of wholesale lenders (who underinvest in monitoring) to a noisy public signal on banks’ solvency. Brunnermeier and Pedersen (2009) consider asset markets where traders face margin calls based on value-at-risk calculations, and show that liquidity dry-ups can emerge as a result of the mutually reinforcing deterioration of market liquidity and funding liquidity. Acharya, Gale, and Yorulmazer (2009) show that, when short-term lending is secured with long-term assets, small shocks can lead to large changes in the required haircuts, causing a freeze in that type of lending. Diamond and Rajan (2009) attribute credit freezes to the hoarding of liquidity by potential lenders who anticipate that they might profit from the fire-sale prices of the liquidated assets of distressed banks in a later stage of a crisis.
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Mutual Fund Flows and Market Capitalisation –  A Correlational Study

Mutual Fund Flows and Market Capitalisation – A Correlational Study

Mutual Fund, as the name suggests, consist of two words – Mutual and Fund. Mutual means something, which is commonly possessed, shared, felt, and received by each of two or more persons. Fund means a sum of money or stock of convertible wealth which is employed in, set aside for or available for a business or other purpose. In general, it means money or reserve stock. So, true to its name, Mutual Fund is a fund consisting of savings, which are pooled from a large number of savers and invested, in a well- diversified portfolio of securities, so as to ensure them a steady return by assuming minimum risk.
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Effect of Money Supply on the Stock Market

Effect of Money Supply on the Stock Market

background of portfolio balance channel stems from modern portfolio theory (see Markowitz, 1952; Sharpe, 1964, 1966, 1994), segmented debt market (e.g. Riefler, 1930; Vayanos, Vila, 2009), imperfect asset substitution (Tobin, 1969; Andres et al., 2014) and term structure of interest rates (Culbertson, 1957). There is empirical evidence of existing portfolio balance transmission channel on both national and international level (see Neely, 2010; Bauer, Neely, 2014; Gagnon et al. 2010; Wright, 2012). Opponents of the channel emphasize three critical domains. First, although numerous empirical works acknowledge occurrence and efficiency of portfolio balance, they differ in opinions on how it works (Cochrane, 2012). Moreover, the term premium is not defined precisely because standard deviation of returns contains both market risk and default risk. However, it is advisable to measure term premium only with market risk. Second, the preferred‑habitat models as a part of segmented markets hypothesis are usually employed to rationalize the effects of portfolio balance channel. In order to explain the efect, preferred‑habitat model presumes that investors are not willing to change their maturities and they stick to their preferred maturities (Vayanos, Vila, 2009). However, debt market finds its equilibrium only if investors can substitute between their preferred maturities. The third domain of criticism reflects doubts about the strength of the aforementioned transmission channel. Bauer and Rudebusch (2011) doubt the scale of Fed’s asset purchases to be sufficient to impact the bond market. Although Thornton (2012) acknowledges portfolio balance channel as a part of transmission mechanism, he suggests its quantitative effect is insignificant. Christensen and Rudebusch (2012) similarly impugn importance of portfolio balance channel as they consider the signaling channel more significant. Insufficient segmentation of debt market might be one of the key reasons for limited effect of LSAP on economic activity via portfolio balance channel (Cúrdia and Ferrero, 2013). According to Thornton (2012), discussed transmission channel also lacks empirical evidence on low frequency data as timeframe of the study plays a role in consistency of results (see Hancock and Passmore, 2011; Stroebel and Taylor, 2009).
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Fund Manager Characteristics and Performance

Fund Manager Characteristics and Performance

compensated by the accompanying higher returns and thus risk is not involved in the determination of comprehensive performance. An implication of the finding is that the manager characteristics that are associated with lower risk should not be taken into consideration in the selection of fund managers when the target is to achieve better comprehensive performance. Additionally, timing skill and picking ability affect a fund’s excess return and the impact of picking ability is greater than that of timing skill. Therefore, we conclude that fund manager characteristics affect comprehensive performance mainly through their impact on managers’ picking ability, which in turn affect excess return and, ultimately, comprehensive performance. The common characteristics that influence picking ability, excess return, and comprehensive performance are possession of an MBA or a CFA. We also address endogeneity concerns and rule out the possibility that managers with an MBA or a CFA share common characteristics, such as belonging to the same fund management firm or graduating from the same university. Therefore, having an MBA or a CFA is the most important quality of fund managers in China to outperform his/her peers in achieving better stock picking ability, higher excess returns, and better comprehensive performance.
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Impact of Market-Based Financial Structure on the Growth of Nigerian Economy: An Econometric Analysis

Impact of Market-Based Financial Structure on the Growth of Nigerian Economy: An Econometric Analysis

He however, recommended the removal of impediment to stock market development which includes tax, legal and regulatory barriers. Development of the nation’s infrastructure create enabling environment where business can strive, employment policies that will increase the productivity and efficiency of firms as well as encouraging of the Nigerian securities and exchange commission to facilitate the growth of the market, restore the confidence of stock market participants and safe guard the interest of shareholders by checking sharp practices of market operators. Obamiro (2005) investigates the role of the Nigerian stock market in the light of economic growth. The authors reported that a significant positive effect of stock market on economic growth exists. He suggested that government should create more enabling environment so as to increase the efficiency of the stock market to attain higher economic growth. Ezeola (2009) investigates the nature of the relationship that exists between stock market development and the level of investments (domestic private investments and foreign private investments) flow in Nigeria. The author discovered that stock market development promotes domestic private investment flows thus suggesting the enhancement of the economy production capacity as well as promotion of the growth national output. However, the result shows that stock market development has not been able to encourage the
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Marx without Equilibrium

Marx without Equilibrium

‘The inane Say’, as Marx describes him, has posthumously donated his name to the following conception: because every sale is an exchange and hence a purchase, the total of all sales must equal the total of all purchases and it is impossible, therefore, to have a general surplus or a general shortage of all goods. This idea is so disruptive of any attempt to understand a real market economy that Keynes made it the basis of his classification of economics: classicals are those who support Say’s law. As for Marx, he singles out ‘this miserable individual’ for more vitriol than any other contemporary except perhaps Malthus.
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Performance of Mutual Funds and Mutual Fund Manager in Pakistan

Performance of Mutual Funds and Mutual Fund Manager in Pakistan

Ali and Qudous [4], studies the performance evaluation of funds mutual with perspective to Pakistan for the period of 2005 – 2009 in which researcher selected 15 mutual funds to evaluated Sharpe and Treynor ratio. Data is congregated from the different sources of KSE 100 index included official websites and yahoo finance, semiannual T-Bills risk free rate data collected from state bank of Pakistan and monthly closing prices were gathered from electronic data base of the Business Recorder. The standard deviation tool was employed and study resulted that overall performance of mutual funds is not acceptable in the context of Pakistan. Mahreen Mahmud et al. (2011), explored that the performance of mutual fund industries in case of Pakistan during the interval of 2006 to 2010. In which researcher categorized the market into; bullish and bearish market, which helps to examined Islamic funds were showed firm growth in spite of their bland comparison to conventional funds. Income funds as a result to underdeveloped bond market seem to be wretched and in the course higher t-bill rates have exhibited in antexcess returns Based on this literature review following alternative hypothesis has been developed.
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The economics of intervention in the short-term money market

The economics of intervention in the short-term money market

and official STMM holdings are listed below in Table 2.5, and show that at this stage the official STMM remained the major dealers in the bill market. During 1968, the money market corporations overtook the authorised dealers as the major traders in bills, and with an expansion in the number of firms dealing in bills and the increasing acceptance of bills as a means of short-term finance, they were able to take full advantage of the tightening credit conditions of 1969/70, and to more than quadruple the size of the market. The non-bank bills' growth was considerably strengthened by the minimum 1.2% endorsement fee on bank bills, and although at the start of 1970 it remained smaller than the bank bill market, it overhauled it during the year. The development of the Australian market did not follow the British or American pattern in that there are no merchant bankers devoted entirely to the bill market. Australia has no specialist accept­ ance houses. The official STMM took on a dual role of acceptance houses and discount houses, after buying (discounting) the bill from a customer wanting funds. Discount rates tended to be reasonably stable - more so than in the case of bank bills - and many companies linked their rates to 26-week Treasury notes. This was especially true in the case of the mining industry, wiiich helped to develop the commercial bill market, especially through consortium
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Discussion and Analysis on Public Private Partnership Industry Fund Mode under New Urbanization Background

Discussion and Analysis on Public Private Partnership Industry Fund Mode under New Urbanization Background

During the new urbanization construction process, PPP industry fund mainly invests on the infrastructure and public utilities. In general, PPP industry fund will select the investment objects with clear project objective and output, defined project service object and regional scope, mature and stable project technology, long-term and sustainable operating project and large construction investment scale that mainly depend on the user’s payment. The main factor relies that, it is hard to define whether the project output is not convenient for governmental and social public supervision. The rapid change of project technology means that it contains higher technology and policy risk. The simple public welfare project without charging mechanism and the return on investment of so- cial capital that mainly depends on the governmental subsidy will increase the financial burden. In general, the projects that satisfy the investment conditions of PPP industry fund mainly have the following features: rela- tively flexible price adjustment mechanism, relatively high marketization degree, relatively large investment scale and long-term and stable demand [3].
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Is Money Neutral In Stock Market? The Case of Malaysia

Is Money Neutral In Stock Market? The Case of Malaysia

There relationship between stock returns and money supply has been extensively studied. Nonetheless, the empirical findings are inconclusive. Some studies find that there is a strong relationship between money supply and stock market (money does matter); while others show that monetary shocks do not have profound impact on stock market (money is neutral). In empirical literature, the inability of changes in the stock of money to affect real economic activity except the general price level is known as long-run neutrality (LRN) of money. Davidson and Froyen (1982), Mookerjee (1987), Jeng et al. (1990), Serletis (1993), Malliaropulos (1995), Gjerde and Sættem (1999), Puah et al. (2006), Kandir (2008), Alatiqi and Fazel (2008), among others, find that the monetary neutrality hypothesis prevails in the major international stock markets. This finding is in sharp contrast to Sprinkel (1964), the pioneer researcher in the study of money supply-stock market nexus, which discovers that the U.S. stock prices appear to be informationally inefficient with respect to money supply. Studies by other researchers which also report non-neutrality of money with respect to stock market include, to name some, Cooper (1974), McGee and Stasiak (1985), Fung and Lie (1990), Mookerjee and Yu (1997), Habibullah et al. (1998), Kwon and Shin (1999), Yamak and Kucukkale (2000), Wongbangpo and Sharma (2002) and Puah and Jayaraman (2007).
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It's not cold money it's warm money : microcredit and empowerment in the case of the New Zealand women's loan fund

It's not cold money it's warm money : microcredit and empowerment in the case of the New Zealand women's loan fund

impeccable rigour about the condition of the poor’, but their situation is almost impossible to understand ‘until your own feet can feel the ache that accompanies the proud display of little John’s new shoes from the reach-me-down shop’. They continue, arguing that it is: ‘these emotional and moral consequences of being poor that are hardest to grasp for those who have never experienced such deprivations themselves, but they are at the very heart and substance of poverty’ (Coates and Silburn, 1983:67). 1 was particularly concerned whether Borrowers would agree to talk to a stranger about borrowing money. This is a very personal question, which relates to self-esteem/shame/fear. I had to be conscious of these issues, although here my work experience helped in that I had previous experience communicating with women from most walks of life, minority ethnic backgrounds and income levels. Even though interviewing Borrowers was time-consuming and more difficult than just interviewing Coordinators, Trustees and Donors, it gave a number of seldom- heard people voice. As it turned out, 1 had few problems in arranging interviews and, in my view, the interviews were open and informative. Sometimes it was hard to stop women talking or they had concentrated so much on the interview that a carefully chosen cake remained un-eaten. As far as possible, I was able to structure time in between interviews, so l did not have to hurry interviewees out of the interview situation. It was important that the surrounding structure of the interview should be supportive and hopefully empowering.
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Permanent aggregate demand and fiscal policy

Permanent aggregate demand and fiscal policy

conception of the State is mechanical and impersonal. The role of executive power is almost zero in the raising of taxes and public spending. The budget is tapped out by a multitude of fingers ; by ideological and ghostly legacies, the trade union forces, the very executive power, political opposition, the banking groups, industry, Galbraith´s techno-structure, the secret services, military powers, international and military political alliances etc. In our conception of the Machine, there are more fingers than the Leviathan has fingers, but at the same time there is less or no will at all. The budget is drawn up in the same way that the four forces of nature govern the atoms and the stars without any human intervention. Nothing could be further removed from the financial planning, calculations or decisions made in the finance department of a company. In the budget, pensioners wish to maintain the real power of their pension, consumers want to pay less tax, the military want more money to spend, the insidious intelligence services want to handle more information which is of interest to those in power who will buy it, bankers to have more money to finance politicians and industrialists to sell goods to the State.
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