Money in the Right Hands

76 Pages Posted: 3 Feb 2022 Last revised: 30 Apr 2024

See all articles by Aleksandra Rzeźnik

Aleksandra Rzeźnik

York University - Schulich School of Business

Rüdiger Weber

WU Vienna; Vienna Graduate School of Finance (VGSF)

Date Written: December 12, 2022


We study the price effects of mutual fund fire sales and index reconstitutions from a demand-based perspective. We introduce a stock-level measure of specialized demand, capturing the available investment capacity of investors likely to have a high valuation for a stock and find that it determines non-fundamental price discounts. When specialized, elastic demand is scarce, we observe the price pressure documented in the literature. Specialized demand does not proxy for informed trading, and asset quality or adverse selection are unlikely to explain our results. Rather, inefficient allocations induced by fire sales lead to transiently higher discount rates and price pressure.

Keywords: Mutual funds, Demand-based asset pricing, Fire sales, Liquidity, Market efficiency

JEL Classification: G11, G12, G14, G23

Suggested Citation

Rzeźnik, Aleksandra and Weber, Rüdiger, Money in the Right Hands (December 12, 2022). Available at SSRN: or

Aleksandra Rzeźnik (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3

Rüdiger Weber

WU Vienna ( email )

Welthandelsplatz 1 1
Wien, 1020

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics