Similar Investors

50 Pages Posted: 9 Oct 2018 Last revised: 28 Apr 2019

See all articles by Co-Pierre Georg

Co-Pierre Georg

Deutsche Bundesbank; University of Cape Town (UCT)

Diane Pierret

Universite du Luxembourg - Luxembourg School of Finance

Sascha Steffen

Frankfurt School of Finance & Management

Date Written: April 10, 2019


We study the effect of portfolio similarity among investors on their decision to roll over funding to a security issuer. Using detailed security level holdings of U.S. Money Market Mutual Funds (MMFs), we construct a novel measure of portfolio similarity among institutional investors (i.e. MMFs) who are exposed to the same security issuer. Consistent with correlated liquidity needs of more similar investors, the similarity of a fund to other investors in a security issuer increases joint liquidation costs for the security. Among funds investing in the same issuer at the same time, we find that the funds reducing their exposure to the issuer are the most similar funds. At the issuer level, the average similarity of the funds investing in an issuer predicts the issuer's total funding flows in the next period. In other words, issuers cannot substitute this loss in funds from similar investors, particularly during crises, and are thus exposed to greater funding liquidity risk.

Keywords: institutional investors, liquidity risk, wholesale funding

JEL Classification: G1, G21

Suggested Citation

Georg, Co-Pierre and Pierret, Diane and Steffen, Sascha, Similar Investors (April 10, 2019). Available at SSRN: or

Co-Pierre Georg (Contact Author)

Deutsche Bundesbank ( email )

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

University of Cape Town (UCT) ( email )

Private Bag X3
Rondebosch, Western Cape 7701
South Africa

Diane Pierret

Universite du Luxembourg - Luxembourg School of Finance ( email )

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

Sascha Steffen

Frankfurt School of Finance & Management ( email )

Frankfurt, 60322
16097326929 (Phone)


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