RT Journal Article
SR Electronic
T1 Mutual Fund Illiquidity and Stock Price Fragility: A Study Based on Chinese Mutual Funds
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 177
OP 200
DO 10.3905/jpm.2022.1.388
VO 48
IS 8
A1 Jiaxun Song
A1 Jin Gao
YR 2022
UL https://pm-research.com/content/48/8/177.abstract
AB From the perspective of Chinese equity fund shareholding, the authors study the economic consequences of institutional investors’ shareholding illiquidity. They use the stock holding data of Chinese mutual funds to verify that the illiquidity of mutual funds’ stock holding brings fragility to individual stock returns. Specifically, to meet investor redeeming requirement, illiquid fund managers are forced to fire-sale assets. The selling pressure created by this behavior causes the stock to be traded at a price lower than its true value, increasing the stock price collapse risk. Finally, using COVID-19 case data in China, the authors design a quasi-natural experiment confirming the conclusion in this article.