Aggregate Risk and Efficiency of Mutual Funds

Simas Kucinskas
Additional contact information
Simas Kucinskas: VU University Amsterdam, the Netherlands

No 15-113/VI, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: I analyze welfare properties of mutual funds in the Diamond-Dybvig model with two sources of aggregate risk: undiversifiable interest rate risk and shocks to aggregate liquidity demand. Mutual funds are inefficient when the economy faces undiversifiable interest rate risk. However, if only aggregate liquidity demand is stochastic, mutual funds can implement the social optimum even when liquidity demand is not directly observed.

Keywords: Mutual funds; equity contracts; liquidity creation; liquidity insurance; aggregate risk (search for similar items in EconPapers)
JEL-codes: D91 E61 G21 G23 G28 (search for similar items in EconPapers)
Date: 2015-09-24
New Economics Papers: this item is included in nep-fmk and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://papers.tinbergen.nl/15113.pdf (application/pdf)

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:tin:wpaper:20150113

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().