Runs on Money Market Funds

Allan Timmermann and Russell Wermers ()

No 9906, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study daily money market mutual fund flows at the individual share class level during the crisis of September 2008. The empirical approach that we apply to this fine granularity of data brings new insights into the investor and portfolio holding characteristics that are conducive to run-risk in cash-like asset pools, as well as providing evidence on the time-series dynamics of runs and the equilibria that develop. We find that outflows during the crisis are concentrated among those money funds with higher promised yields, less liquid portfolios, low implicit sponsor backing, and higher prior flow volatility that cater to very large-scale institutional investors. Our data uniquely allows us to study the strategic redemption behavior of investors with differing levels of sophistication by studying flows to different share classes of the same money fund, thus holding constant the quality of the underlying portfolio. Our results are consistent with the most sophisticated (largest scale) institutional investors exhibiting the greatest level of strategic redemptions during the crisis, which created significant negative externalities for more passive institutional investors.

Keywords: Bank runs; Money market mutual funds; Quantile regression; Strategic complementarities (search for similar items in EconPapers)
JEL-codes: G01 G21 G23 (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://cepr.org/publications/DP9906 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:9906

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP9906

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().