The Role of Equity Funds in the Financial Crisis Propagation
AbstractThe early stage of the recent ?nancial crisis was marked by large value losses for bank stocks. This paper identi?es the equity funds most affected by this valuation shock and examines its consequences for the non-?financial stocks owned by the respective funds. We find that (i) ownership links to these ?distressed equity funds? lead to large underperformance of the most exposed non-fi?nancial stocks, and in aggregate this contributes an additional 10.9% to the overall stock market downturn; (ii) distressed ?fire sales and the associated price discounts are concentrated among those exposed stocks which perform relatively well; and (iii) stocks with higher fund ownership generally performed much better throughout the crisis.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 11-35.
Length: 49 pages
Date of creation:
Date of revision:
Financial Crisis Propagation; Fire Sales; Mutual Funds;
Other versions of this item:
- Hau, Harald & Lai, Sandy, 2012. "The Role of Equity Funds in the Financial Crisis Propagation," CEPR Discussion Papers 8819, C.E.P.R. Discussion Papers.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- 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
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Hau, Harald & Lai, Sandy, 2013.
"Real effects of stock underpricing,"
Journal of Financial Economics,
Elsevier, vol. 108(2), pages 392-408.
- Stavros Peristiani & Vanessa Savino, 2011. "Are credit default swaps associated with higher corporate defaults?," Staff Reports 494, Federal Reserve Bank of New York.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marilyn Barja).
If references are entirely missing, you can add them using this form.