Payoff complementarities and financial fragility: Evidence from mutual fund outflows
Publication
, Journal Article
Chen, Q; Goldstein, I; Jiang, W
Published in: Journal of Financial Economics
August 1, 2010
The paper provides empirical evidence that strategic complementarities among investors generate fragility in financial markets. Analyzing mutual fund data, we find that, consistent with a theoretical model, funds with illiquid assets (where complementarities are stronger) exhibit stronger sensitivity of outflows to bad past performance than funds with liquid assets. We also find that this pattern disappears in funds where the shareholder base is composed mostly of large investors. We present further evidence that these results are not attributable to alternative explanations based on the informativeness of past performance or on clientele effects. We analyze the implications for funds' performance and policies. © 2010 Elsevier B.V.
Duke Scholars
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Published In
Journal of Financial Economics
DOI
ISSN
0304-405X
Publication Date
August 1, 2010
Volume
97
Issue
2
Start / End Page
239 / 262
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1606 Political Science
- 1502 Banking, Finance and Investment
- 1402 Applied Economics
Citation
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Chen, Q., Goldstein, I., & Jiang, W. (2010). Payoff complementarities and financial fragility: Evidence from mutual fund outflows. Journal of Financial Economics, 97(2), 239–262. https://doi.org/10.1016/j.jfineco.2010.03.016
Chen, Q., I. Goldstein, and W. Jiang. “Payoff complementarities and financial fragility: Evidence from mutual fund outflows.” Journal of Financial Economics 97, no. 2 (August 1, 2010): 239–62. https://doi.org/10.1016/j.jfineco.2010.03.016.
Chen Q, Goldstein I, Jiang W. Payoff complementarities and financial fragility: Evidence from mutual fund outflows. Journal of Financial Economics. 2010 Aug 1;97(2):239–62.
Chen, Q., et al. “Payoff complementarities and financial fragility: Evidence from mutual fund outflows.” Journal of Financial Economics, vol. 97, no. 2, Aug. 2010, pp. 239–62. Scopus, doi:10.1016/j.jfineco.2010.03.016.
Chen Q, Goldstein I, Jiang W. Payoff complementarities and financial fragility: Evidence from mutual fund outflows. Journal of Financial Economics. 2010 Aug 1;97(2):239–262.
Published In
Journal of Financial Economics
DOI
ISSN
0304-405X
Publication Date
August 1, 2010
Volume
97
Issue
2
Start / End Page
239 / 262
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1606 Political Science
- 1502 Banking, Finance and Investment
- 1402 Applied Economics