Runs on Money Market Mutual Funds

60 Pages Posted: 14 Mar 2011 Last revised: 12 Sep 2015

See all articles by Lawrence Schmidt

Lawrence Schmidt

MIT Sloan School of Management

Allan Timmermann

UCSD ; Centre for Economic Policy Research (CEPR)

Russ Wermers

University of Maryland - Robert H. Smith School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: September 11, 2015

Abstract

We study daily money market mutual fund flows at the individual share class level during September 2008. This fine granularity of data facilitates new insights into investor and portfolio holding characteristics conducive to run risk in cash-like asset pools. Empirically, 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.

Keywords: Money market mutual funds; bank runs; strategic complementarities

JEL Classification: G01, G21, G23

Suggested Citation

Schmidt, Lawrence and Timmermann, Allan and Wermers, Russell R., Runs on Money Market Mutual Funds (September 11, 2015). Available at SSRN: https://ssrn.com/abstract=1784445 or http://dx.doi.org/10.2139/ssrn.1784445

Lawrence Schmidt

MIT Sloan School of Management ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States

HOME PAGE: http://https://sites.google.com/site/lawrencedwschmidt/home

Allan Timmermann

UCSD ( email )

9500 Gilman Drive
La Jolla, CA 92093-0553
United States
858-534-0894 (Phone)

HOME PAGE: http://rady.ucsd.edu/people/faculty/timmermann/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Russell R. Wermers (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

Department of Finance
College Park, MD 20742-1815
United States
301-405-0572 (Phone)
301-405-0359 (Fax)

HOME PAGE: http://www.rhsmith.umd.edu/finance/rwermers/

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