<p>Monthly savings plans in stocks or funds are typical investments for many people. On aggregate, these plans generate a large demand on the underlying assets, often around the end/beginning of a month.</p>

<p><strong>How do banks or fund managers handle these investments?</strong></p>

<p>I assume two strategies, wich both seems to have problems:</p>

<ol>
<li>As monthly savings plans are often due at the end of the month, a financial institution buys the underlying assets within the first days of a month. This demand would drive stock prices at the beginning of a month, but this effect is not observable in empirical research.</li>
<li>Financial institutions spread the buying of underlying assets. Therefore, they bear market-risk, as the claim of monthly savers on these assets is not covered by the bank/fund by actually holding these assets. I know, that this risk can be managed, but on aggregate, not all institutions can hedge their offered investment plans without holding any underlying asset.</li>
</ol>

CC BY-SA 3.0
2017-09-20T14:53:42.893Z
According to this working paper there *is* an [end-of-month effect.](https://www.wsj.com/articles/how-funds-distort-the-stock-market-with-month-end-trading-1428375831) For every 10 papers that prove something, you can always find 10 other papers that prove the opposite.
M3RS
CC BY-SA 3.0
2017-09-25T13:23:39.997Z
@Andras that link is paywalled. Can you provide a free one? Maybe the link to the actual paper?
luchonacho
CC BY-SA 3.0
2017-09-25T21:55:33.197Z
The paper Andras mentioned is here: https://research.mbs.ac.uk/accounting-finance/Portals/0/docs/Dash%20for%20Cash%20Month%20End%20Liquidity%20Needs.pdf
Ubiquitous
<financial-economics><stock-market><investment><asset-pricing><saving>
Monthly savings plans
skoestlmeier
# Monthly savings plans

(Asked by: username_0 on 2017-09-20)

Monthly savings plans in stocks or funds are typical investments for many people. On aggregate, these plans generate a large demand on the underlying assets, often around the end/beginning of a month.

**How do banks or fund managers handle these investments?**

I assume two strategies, wich both seems to have problems:

1. As monthly savings plans are often due at the end of the month, a financial institution buys the underlying assets within the first days of a month. This demand would drive stock prices at the beginning of a month, but this effect is not observable in empirical research.
2. Financial institutions spread the buying of underlying assets. Therefore, they bear market-risk, as the claim of monthly savers on these assets is not covered by the bank/fund by actually holding these assets. I know, that this risk can be managed, but on aggregate, not all institutions can hedge their offered investment plans without holding any underlying asset.

**Tags:** financial-economics, stock-market, investment, asset-pricing, saving

> **Comments:**
> **username_1**: According to this working paper there *is* an [end-of-month effect.](https://www.wsj.com/articles/how-funds-distort-the-stock-market-with-month-end-trading-1428375831) For every 10 papers that prove something, you can always find 10 other papers that prove the opposite.  
> **username_2**: @Andras that link is paywalled. Can you provide a free one? Maybe the link to the actual paper?  
> **username_3**: The paper Andras mentioned is here: https://research.mbs.ac.uk/accounting-finance/Portals/0/docs/Dash%20for%20Cash%20Month%20End%20Liquidity%20Needs.pdf  

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## 0 answers

