Runs on Money Market Mutual Funds
Lawrence D. W. Schmidt
University of California, San Diego (UCSD)
Allan G. Timmermann
University of California, San Diego (UCSD) - Department of Economics; Centre for Economic Policy Research (CEPR)
University of Maryland - Robert H. Smith School of Business
January 2, 2013
This paper studies daily investor flows to and from each money market mutual fund during the period surrounding and including the money fund crisis of September 2008. We focus on the determinants of flows in the prime money fund category to shed light on the covariates of money fund runs, since this category was, by far, the most heavily impacted by the money fund crisis. We find that outflows during the crisis period of September 17-19 are concentrated among a small fraction of funds having certain characteristics. Institutional investors focused their run-like behavior on large funds that were part of a complex having large amounts of institutional money funds (as a fraction of all money funds). In addition, such investors were more likely to run from funds with higher yields, lower expense ratios, and higher prior flow volatility, indicating that "hot money" chased yields, but selectively ran from higher-yield funds that were more vulnerable. Our analysis also suggests that prime retail money funds exhibited many of the same behaviors as institutional funds, although at a much slower and more drawn-out pace. Our paper provides a framework that is useful in understanding potential further regulatory responses to the crisis.
Number of Pages in PDF File: 64
Keywords: Banking Runs, Financial Crisis, Money Market Mutual Fundsworking papers series
Date posted: March 14, 2011 ; Last revised: February 20, 2013
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo7 in 0.453 seconds