Sophisticated and Unsophisticated Runs

Marco Cipriani and Gabriele La Spada

No 956, Staff Reports from Federal Reserve Bank of New York

Abstract: What makes investors run? We show that during the March 2020 run on prime money market funds, institutional and retail investors behaved in dramatically different ways: sophisticated institutional investors ran preemptively based on fundamentals; unsophisticated retail investors ran based on herd-like informational spillovers, leaving funds belonging to families with large institutional outflows. We show that based on website traffic, institutional investors acquired more information on fund portfolios; furthermore, we show that within-family institutional outflows were informative to retail investors. Both investor types ran more if switching to a safer investment was cheaper, suggesting that safe-haven availability exacerbates run.

Keywords: runs; COVID-19; money market funds; sophisticated investors; regulation (search for similar items in EconPapers)
JEL-codes: E41 G23 G28 (search for similar items in EconPapers)
Pages: 50
Date: 2020-12-01
Note: Revised April 2024.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: Sophisticated and Unsophisticated Runs (2021)
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