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- Title
Mutual Fund Liquidity Transformation and Reverse Flight to Liquidity.
- Authors
Ma, Yiming; Xiao, Kairong; Zeng, Yao
- Abstract
We identify fixed-income mutual funds as an important contributor to the unusually high selling pressure in liquid asset markets during the COVID-19 crisis. We show that mutual funds experienced pronounced investor outflows amplified by their liquidity transformation. In meeting redemptions, funds followed a pecking order by first selling their liquid assets, including Treasuries and high-quality corporate bonds, which generated the most concentrated selling pressure in these markets. Overall, the estimated price impact of mutual funds was sizable at a third of the increase in Treasury yields and a quarter of the increase in corporate bond yields during the COVID-19 crisis.
- Subjects
MUTUAL funds; LIQUIDITY (Economics); FIXED-income securities; COVID-19 pandemic; SELLING; LIQUID assets; REDEMPTION of securities; CORPORATE bonds; RATE of return on government securities
- Publication
Review of Financial Studies, 2022, Vol 35, Issue 10, p4674
- ISSN
0893-9454
- Publication type
Article
- DOI
10.1093/rfs/hhac007