Quotation Rzeznik, Aleksandra. 2018. Mutual fund flight-to-liquidity.


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Abstract

This paper empirically investigates a channel through which market uncertainty affects the liquidity premium. Using data at the mutual fund level, I document that increases in market uncertainty are associated with lower performance and more withdrawals. Consequently, funds adjust the composition of their portfolio towards more liquid assets in order to meet potential redemptions. Aggregated over many funds, this `flight-to-liquidity' places significant upward price pressure on the liquidity premium: a one standard deviation increase in my measure of active liquidity management yields a 1.22 standard deviation increase in the return spread between illiquid and liquid stocks.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title Mutual fund flight-to-liquidity
Year 2018
URL https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2912368
JEL G01, G11, G12, G14, G20

Associations

People
Rzeznik, Aleksandra (Former researcher)
Organization
Institute for Finance, Banking and Insurance IN (Details)
Research areas (Ă–STAT Classification 'Statistik Austria')
5361 Financial management (Details)
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