Seasonal Variation in Cost‐of‐Funds at Thrift Institutions

The purpose of this note is threefold. First, in addition to the well‐known seasonal pattern to the eleventh‐district cost‐of‐funds (COF), we document a twelve‐month seasonal in the national median COF. Second, we demonstrate that the cause of seasonality in each of these COF series is due to the maladjustment of length‐of‐month effects. In particular, the eleventh‐district COF is biased upwards in relatively short months while the national median is biased downward. Third, we show that the popular partial adjustment model for modeling the COF is misspecified.