Runs on Money Market Funds

63 Pages Posted: 2 Jun 2014

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

Date Written: March 2014


We study daily money market mutual fund flows at the individual share class level during the crisis of September 2008. The empirical approach that we apply to this fine granularity of data brings new insights into the investor and portfolio holding characteristics that are conducive to run-risk in cash-like asset pools, as well as providing evidence on the time-series dynamics of runs and the equilibria that develop. We find that outflows during the crisis are concentrated among those money funds with higher promised yields, less liquid portfolios, low implicit sponsor backing, and higher prior flow volatility that cater to very large-scale institutional investors. Our data uniquely allows us to study the strategic redemption behavior of investors with differing levels of sophistication by studying flows to different share classes of the same money fund, thus holding constant the quality of the underlying portfolio. Our results are consistent with the most sophisticated (largest scale) institutional investors exhibiting the greatest level of strategic redemptions during the crisis, which created significant negative externalities for more passive institutional investors.

Keywords: bank runs, money market mutual funds, quantile regression, strategic complementarities

JEL Classification: G01, G21, G23

Suggested Citation

Schmidt, Lawrence and Timmermann, Allan and Wermers, Russell R., Runs on Money Market Funds (March 2014). CEPR Discussion Paper No. DP9906. Available at SSRN:

Lawrence Schmidt (Contact Author)

MIT Sloan School of Management ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States

HOME PAGE: http://

Allan Timmermann

UCSD ( email )

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


Centre for Economic Policy Research (CEPR)

United Kingdom

Russell R. Wermers

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)


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