Digital payment, money market fund and investment behavior

Wei Wang and Lin Li

Pacific-Basin Finance Journal, 2024, vol. 85, issue C

Abstract: Does digital payment affect the flow patterns in money market funds? In recent years, some money market funds (MMFs) have been introduced to digital payment platforms. The users can hold these MMFs and directly use them for transactions. This additional liquidity may influence investor behavior. Using individual-level data from the world's largest digital payment platform Alipay, this paper investigates the impact of digital payment on flow patterns in MMFs. We show that compared with traditional MMFs, the MMFs combined with digital payment are more attractive to investors, and flows in these MMFs are less sensitive to their past performances. Furthermore, in the period with high illiquidity, digital payment decreases the outflows from MMFs, indicating that digital payment potentially decreases liquidity risk and enhances the stability of the money market.

Keywords: Digital payment; Money market fund; Flow-performance sensitivity (search for similar items in EconPapers)
JEL-codes: G1 G20 G21 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24000994

DOI: 10.1016/j.pacfin.2024.102348

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