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Where Do Institutional Investors Seek Shelter when Disaster Strikes? Evidence from COVID-19


  • Simon Glossner

    (University of Virginia - Darden School of Business)

  • Pedro Matos

    (University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI))

  • Stefano Ramelli

    (University of Zurich - Department of Banking and Finance)

  • Alexander F. Wagner

    (University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute)


Institutional investors played a crucial role in the COVID-19 market crash. U.S. stocks with higher institutional ownership -- in particular, those held more by active, short-term, and domestic institutions -- performed worse. An analysis of changes in holdings through the first quarter of 2020 reveals that mutual funds, investment advisors, and pension funds favored stocks with strong financials (low debt and high cash), whereas hedge funds sold stocks indiscriminately. None of these institutional investor groups appear to have actively tilted their portfolios toward firms with better environmental and social performance. Data from a large discount brokerage indicate that retail investors acted as liquidity providers. Overall, the results suggest that when a tail risk realizes, institutional investors express a preference for "hard" measures of firm resilience.

Suggested Citation

  • Simon Glossner & Pedro Matos & Stefano Ramelli & Alexander F. Wagner, 2020. "Where Do Institutional Investors Seek Shelter when Disaster Strikes? Evidence from COVID-19," Swiss Finance Institute Research Paper Series 20-56, Swiss Finance Institute.
  • Handle: RePEc:chf:rpseri:rp2056

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    Cited by:

    1. Nils Engelhardt & Jens Ekkenga & Peter Posch, 2021. "ESG Ratings and Stock Performance during the COVID-19 Crisis," Sustainability, MDPI, Open Access Journal, vol. 13(13), pages 1-15, June.
    2. Mahata, Ajit & Rai, Anish & Nurujjaman, Md. & Prakash, Om, 2021. "Modeling and analysis of the effect of COVID-19 on the stock price: V and L-shape recovery," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 574(C).
    3. Zaremba, Adam & Kizys, Renatas & Tzouvanas, Panagiotis & Aharon, David Y. & Demir, Ender, 2021. "The quest for multidimensional financial immunity to the COVID-19 pandemic: Evidence from international stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 71(C).

    More about this item


    Cash holdings; Coronavirus; Corporate debt; COVID-19; ESG; Event study; Financial crisis; Institutional ownership; Leverage; Pandemic; Retail investors; Robinhood; SARS-CoV-2; Tail risk;
    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
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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