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  3. American Economic Review
  4. September 2016
  5. Runs on Money Market Mutual Funds

Runs on Money Market Mutual Funds

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Abstract

We study daily money market mutual fund flows at the individual share class level during September 2008. This fine granularity of data allows new insights into investor and portfolio holding characteristics conducive to run risk in cash-like asset pools. We find that cross-sectional flow data observed during the week of the Lehman failure are consistent with key implications of a simple model of coordination with incomplete information and strategic complementarities. Similar conclusions follow from daily models fitted to capture dynamic interactions between investors with differing levels of sophistication within the same money fund, holding constant the underlying portfolio.

Citation

Schmidt, Lawrence, Allan Timmermann, and Russ Wermers. 2016. "Runs on Money Market Mutual Funds." American Economic Review, 106 (9): 2625-57. DOI: 10.1257/aer.20140678

Additional Materials

JEL Classification

  • D14 Household Saving; Personal Finance
  • G11 Portfolio Choice; Investment Decisions
  • G23 Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors