Mutual fund illiquidity, selling pressure, and left-tail risk in stocks

Lili Chen and Jianxiang Liu

Economics Letters, 2024, vol. 242, issue C

Abstract: We examine whether mutual fund illiquidity introduces fragility into stock prices. The results show that stocks held by more illiquid funds subsequently experience higher left-tail risk and more outflows-induced mutual fund selling. Specifically, this positive effect is almost entirely concentrated during periods of high economic policy uncertainty and bear market. Finally, we confirm that stocks’ liquidity commonality and asymmetric information do not explain our findings. Our research has important implications for fund managers in liquidity management and for regulatory authorities in preventing the risk of investor runs.

Keywords: Mutual fund illiquidity; Left-tail risk; Selling pressure (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176524003409
Full text for ScienceDirect subscribers only

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:eee:ecolet:v:242:y:2024:i:c:s0165176524003409

DOI: 10.1016/j.econlet.2024.111856

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().