Aggregate Risk and Efficiency of Mutual Funds

I analyze welfare properties of mutual funds in the Diamond-Dybvig model with two sources of aggregate risk: undiversifiable interest rate risk and shocks to aggregate liquidity demand. Mutual funds are inefficient when the economy faces undiversifiable interest rate risk. However, if only aggregate liquidity demand is stochastic, mutual funds can implement the social optimum even when liquidity demand is not directly observed.

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Year of publication:	2015
Authors:	Kucinskas, Simas
Publisher:	Amsterdam and Rotterdam : Tinbergen Institute
Subject:	Mutual funds \| equity contracts \| liquidity creation \| liquidity insurance \| aggregate risk

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Series:	Tinbergen Institute Discussion Paper ; 15-113/VI
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	835550001 [GVK] hdl:10419/125114 [Handle] RePEc:tin:wpaper:20150113 [RePEc]
Classification:	D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving ; E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination ; G21 - Banks; Other Depository Institutions; Mortgages ; G23 - Pension Funds; Other Private Financial Institutions ; G28 - Government Policy and Regulation
Source:	EconStor

Persistent link: https://www.econbiz.de/10011403571