Do fire sales create externalities?

• 成果类型: Article
• 署名作者: Chernenko, Sergey; Sunderam, Adi
• 署名单位: Purdue University System; Purdue University; Harvard University; National Bureau of Economic Research; Harvard University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.08.001
• 发表日期: 2020
• 页码: 602-628
• 关键词: Fire sales; Liquidity management; Mutual funds

摘要

We develop three novel measures of the incentives of equity mutual funds to internalize the price impact of their trading. We show that mutual funds with stronger incentives to internalize their price impact accommodate inflows and outflows by adjusting their cash buffers instead of trading in portfolio securities. As a result, stocks held by these funds have lower volatility, and flows out of these funds have smaller spillover effects on other funds holding the same securities. Our results provide evidence of meaningful fire sale externalities in the equity mutual fund industry. (C) 2019 Elsevier B.V. All rights reserved.