Investor monitoring, money-likeness and stability of money market funds

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dc.contributor Bank of Finland Järvenpää, Maija Paavola, Aleksi 2021-02-12T05:50:01Z 2021-02-12T05:50:01Z 2021
dc.identifier.isbn 978-952-323-366-9
dc.identifier.issn 1456-6184
dc.description.abstract An asset is money-like if investors have no incentives to acquire costly private information on the underlying collateral. However, privately provided money-like assets—like prime money market fund (MMF) shares—are prone to runs if investors suddenly start to question the value of the collateral. Therefore, for risky assets, lack of money-likeness is a necessary condition for lack of run incentives. But is it a sufficient one? This paper studies the effect of the U.S. money market fund reform of 2014–2016 on investor monitoring, money-likeness and stability of institutional prime MMFs. Using the number of distinct IP addresses accessing MMFs’ regulatory reports as a proxy for investor monitoring, we find that the reform increased monitoring and thus decreased money-likeness of institutional prime funds. However, we also show that after the reform, institutional prime funds that are more likely to impose the newly introduced redemption restrictions are more monitored, suggesting that investors may monitor in order to avoid being hit by the restrictions. Overall, our results indicate that increased monitoring, or decreased money-likeness, has not made institutional prime MMFs run-free, and it may have actually created a new source of fragility for MMFs.
dc.format.extent 57
dc.language.iso ENG
dc.relation.ispartofseries Bank of Finland Research Discussion Papers
dc.subject Yhdysvallat
dc.subject.other Money market funds
dc.subject.other money markets
dc.subject.other money market fund reform
dc.subject.other money-likeness
dc.subject.other information sensitivity
dc.subject.other monitoring
dc.title Investor monitoring, money-likeness and stability of money market funds
dc.type Paper
dc.identifier.urn URN:NBN:fi:bof-202102111112
dc.subject.jel G01
dc.subject.jel G23
dc.subject.jel G28 Bank of Finland Research Discussion Papers
dc.series.year 2020
dc.series.number 2/2021
dc.series.sortingnumber 002 12.2.2021
dc.subject.yso rahamarkkinat
dc.subject.yso sijoittajat
dc.subject.yso informaatio
dc.subject.yso seuranta
dc.subject.yso monitorointi
dc.subject.yso sijoitusrahastot
dc.subject.yso sijoitukset
dc.subject.yso rahastot
dc.subject.yso riskit
dc.subject.yso uudistukset
dc.subject.yso vaikutukset
bof-internal.includedInCRIS 1
dc.type.okm D4

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