Abstract

http://ssrn.com/abstract=967553
 
 

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Dynamic Liquidity Preferences of Mutual Funds


Jiekun Huang


University of Illinois at Urbana-Champaign - Department of Finance

June 15, 2015

AFA 2009 San Francisco Meetings Paper
EFA 2008 Athens Meetings Paper
Second Singapore International Conference on Finance 2008

Abstract:     
This paper examines the relation between expected market volatility and open-end mutual funds' liquidity preferences. Using a large panel of actively managed U.S. equity mutual funds, I show that mutual fund managers hold more cash and tilt their holdings more heavily towards liquid stocks during periods when expected market volatility is high. Cross-sectional tests suggest that the dynamic preferences for liquidity are driven by concerns over investor withdrawals during volatile times. Furthermore, I find evidence that this type of dynamic behavior leads to higher fund returns.

Number of Pages in PDF File: 47

Keywords: Mutual funds, liquidity, expected volatility, performance, market timing

JEL Classification: G11, G20, G30


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Date posted: March 19, 2008 ; Last revised: June 5, 2015

Suggested Citation

Huang, Jiekun, Dynamic Liquidity Preferences of Mutual Funds (June 15, 2015). AFA 2009 San Francisco Meetings Paper; EFA 2008 Athens Meetings Paper; Second Singapore International Conference on Finance 2008. Available at SSRN: http://ssrn.com/abstract=967553 or http://dx.doi.org/10.2139/ssrn.967553

Contact Information

Jiekun Huang (Contact Author)
University of Illinois at Urbana-Champaign - Department of Finance ( email )
1206 South Sixth Street
Champaign, IL 61820
United States
HOME PAGE: http://www.huangjk.info
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