Money Market Mutual Fund Maturity and Interest Rates.

The average maturity of money market mutual funds ranged from twenty-nine to fifty-three days during 1982 through 1990. According to the popular press, changes in this time series provide interest rate forecasts. The hypothesis is that fund managers lengthen their maturities when interest rates will be falling, while the maturities are shortened when rate increases are imminent. Granger-causality tests reject this hypothesis. However, there is a causal relation in the opposite direction. Interest rates Granger-cause average fund maturity, indicating that, on average, fund managers respond to past rate changes. Copyright 1992 by Ohio State University Press.