Where Do Institutional Investors Seek Shelter when Disaster Strikes? Evidence from COVID-19

66 Pages Posted: 27 Jul 2020 Last revised: 9 Nov 2020

See all articles by Simon Glossner

Simon Glossner

University of Virginia - Darden School of Business

Pedro Matos

University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

Stefano Ramelli

University of Zurich - Department of Banking and Finance

Alexander F. Wagner

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2020

Abstract

During the COVID-19 market crash, U.S. stocks with higher institutional ownership -- in particular, those held more by active, short-term, and more exposed institutions -- performed worse. Portfolio changes through the first quarter of 2020 reveal that institutional investors prioritized corporate financial strength over "soft" environmental and social performance. Trading data from a large discount brokerage (Robinhood) confirm that retail investors acted as liquidity providers. The effects did not reverse in the second quarter. Overall, the results suggest that when a tail risk realizes, institutional investors amplify price crashes by fire-selling and seeking shelter in "hard" measures of firm resilience.

Keywords: Cash holdings, Coronavirus, Corporate debt, COVID-19, ESG, Institutional ownership, Leverage, Pandemic, Retail investors, Robinhood, Tail risk

JEL Classification: G01, G12, G14, G32, F14

Suggested Citation

Glossner, Simon and Matos, Pedro and Ramelli, Stefano and Wagner, Alexander F., Where Do Institutional Investors Seek Shelter when Disaster Strikes? Evidence from COVID-19 (November 1, 2020). European Corporate Governance Institute – Finance Working Paper No. 688/2020, Swiss Finance Institute Research Paper No. 20-56, Available at SSRN: https://ssrn.com/abstract=3655271 or http://dx.doi.org/10.2139/ssrn.3655271

Simon Glossner

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Pedro Matos

University of Virginia - Darden School of Business ( email )

University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434 243 8998 (Phone)
434 924 0726 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty-research/directory/pedro-matos/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Stefano Ramelli

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland
+41446342953 (Phone)

Alexander F. Wagner (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland
+41 44 634 3963 (Phone)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Swiss Finance Institute ( email )

Switzerland

HOME PAGE: http://www.alex-wagner.com

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