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The response of money market funds to the COVID-19 pandemic

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  • Allen, Kyle D.
  • Baig, Ahmed
  • Winters, Drew B.

Abstract

The Covid-19 Pandemic has increased the attention paid to money market funds. Using Covid-19 cases and a measure of lockdowns, shutdowns, etc., we analyze if money market fund investors and managers responded to the intensity of the pandemic. We ask whether or not the Federal Reserve implementation of the Money Market Mutual Fund Liquidity Facility (MMLF) had an effect on market participant behavior. We find that institutional prime investors responded significantly to the MMLF. Fund managers responded to the intensity of the pandemic but largely ignored the reduction in uncertainty created by the implementation of the MMLF.

Suggested Citation

  • Allen, Kyle D. & Baig, Ahmed & Winters, Drew B., 2023. "The response of money market funds to the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323001630
    DOI: 10.1016/j.frl.2023.103790
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    References listed on IDEAS

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    More about this item

    Keywords

    COVID-19; Money markets; Money market funds; Mangers; Retail investors;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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