Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/193530
Authors: 
Chernenko, Sergey
Sunderam, Adi
Year of Publication: 
2016
Series/Report no.: 
ESRB Working Paper Series 23
Abstract: 
We study liquidity transformation in mutual funds using a novel data set on their cash holdings To provide investors with claims that are more liquid than the underlying assets, funds engage in substantial liquidity management. Specifically, they hold substantial amounts of cash, which they use to accommodate inflows and outflows rather than transacting in the underlying portfolio assets. This is particularly true for funds with illiquid assets and at times of low market liquidity. We provide evidence suggesting that mutual funds' cash holdings are not large enough to fully mitigate price impact externalities created by the liquidity transformation they engage in.
Subjects: 
liquidity transformation
asset management
mutual funds
cash holdings
fire sales
JEL: 
G23
Persistent Identifier of the first edition: 
ISBN: 
978-92-95081-53-6
Document Type: 
Working Paper
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