Similar Investors

70 Pages Posted: 9 Oct 2018 Last revised: 3 Mar 2020

See all articles by Co-Pierre Georg

Co-Pierre Georg

University of Cape Town; Deutsche Bundesbank

Diane Pierret

Universite du Luxembourg - Luxembourg School of Finance; Centre for Economic Policy Research (CEPR)

Sascha Steffen

Frankfurt School of Finance & Management

Date Written: March 1, 2020

Abstract

Consistent with theoretical predictions, we show that investors incorporate expected joint liquidation costs in their portfolio decisions. Using detailed security-level holdings of U.S. Money Market Mutual Funds (MMFs), we construct a new measure of portfolio similarity among investors and show that investors actively manage asset holdings as a function of how similar their portfolios are with those of other investors. They are less likely to roll over investments and they decrease funding when similarity increases. At the issuer level, average similarity also predicts her total funding in the next period. Importantly, issuers are unable to fully replace the loss in funding when similar investors withdraw.

Keywords: institutional investors, liquidity risk, wholesale funding

JEL Classification: G1, G21

Suggested Citation

Georg, Co-Pierre and Pierret, Diane and Steffen, Sascha, Similar Investors (March 1, 2020). Available at SSRN: https://ssrn.com/abstract=3250826 or http://dx.doi.org/10.2139/ssrn.3250826

Co-Pierre Georg (Contact Author)

University of Cape Town ( email )

Private Bag X3
Rondebosch, Western Cape 7701
South Africa

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Diane Pierret

Universite du Luxembourg - Luxembourg School of Finance ( email )

162a, avenue de la Faïencerie
Luxembourg-Limpertsberg, L-1511
Luxembourg

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Sascha Steffen

Frankfurt School of Finance & Management ( email )

Adickesallee
32-34
Frankfurt, 60322
Germany
16097326929 (Phone)

HOME PAGE: http://www.sascha-steffen.de

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