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Connected Funds

Author

Listed:
  • Daniel Fricke
  • Hannes Wilke
  • Itay Goldstein

Abstract

Mutual funds often invest in other funds. In this paper, we analyze the economics behind such cross-fund investments and investigate their financial stability implications. Using granular data for the German fund sector, our main findings are that cross-fund investments (a) are becoming increasingly important over time, (b) were heavily liquidated during March 2020, and (c) display measurable contagion effects. Overall, cross-fund investments can elevate structural fund sector vulnerabilities.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Daniel Fricke & Hannes Wilke & Itay Goldstein, 2023. "Connected Funds," The Review of Financial Studies, Society for Financial Studies, vol. 36(11), pages 4546-4587.
    • Handle: RePEc:oup:rfinst:v:36:y:2023:i:11:p:4546-4587.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhad030
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    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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