Sirio Aramonte,a Chiara Scotti,b Ilknur Zerb
We measure the liquidity profile of open-end mutual funds using the sensitivity of their daily returns to aggregate liquidity. We study how this sensitivity changes around real-activity macroeconomic announcements that reveal large surprises about the state of the economy and after three relevant market events: Bill Gross's departure from PIMCO, Third Avenue Focused Credit Fund's suspension of redemptions, and the effect of Lehman Brothers' collapse on Neuberger Berman. Results show that, following negative news, the sensitivity to aggregate liquidity increases for less-liquid mutual funds, like those that invest in the stocks of small companies and in highyield corporate bonds. The effect is more pronounced during stress periods, suggesting that a deterioration in the funds' liquidity could amplify vulnerabilities in situations of already weak macroeconomic conditions.
JEL Codes: G11, G20, G23.
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