Fire Sales and Information Advantage: When Informed Investor Helps

Massimo Massa and Lei Zhang

No 10536, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the relation between information and fire sales during a crisis. We argue that the reinforcing effect of funding liquidity on market liquidity is weaker when investors have more information about the assets facing sudden price drops (Brunnermeier and Pedersen, 2009). We focus on the affiliation of international asset managers with banking conglomerates. We document that bank affiliation provides an informational advantage. We show that (informed) bank-affiliated foreign ownership before the crisis predicts higher stock liquidity, lower extreme negative return realizations, lower short-selling demand, lower comovement (R2) with the market and higher price informativeness during the crisis.

Keywords: Bank-affiliation; Fire sales; Global asset managers; International crisis; International liquidity.; Transmission (search for similar items in EconPapers)
JEL-codes: G10 G15 G21 (search for similar items in EconPapers)
Date: 2015-04
New Economics Papers: this item is included in nep-cta, nep-ifn and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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