Citation

Discussion Paper Details

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Title: Fire Sales and Information Advantage: When Informed Investor Helps

Author(s): Massimo Massa and Lei Zhang

Publication Date: April 2015

Keyword(s): bank-affiliation, fire sales, global asset managers, international crisis, international liquidity. and transmission

Programme Area(s): Financial Economics

Abstract: We study the relation between information and fire sales during a crisis. We argue that the reinforcing effect of funding liquidity on market liquidity is weaker when investors have more information about the assets facing sudden price drops (Brunnermeier and Pedersen, 2009). We focus on the affiliation of international asset managers with banking conglomerates. We document that bank affiliation provides an informational advantage. We show that (informed) bank-affiliated foreign ownership before the crisis predicts higher stock liquidity, lower extreme negative return realizations, lower short-selling demand, lower comovement (R2) with the market and higher price informativeness during the crisis.

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Bibliographic Reference

Massa, M and Zhang, L. 2015. 'Fire Sales and Information Advantage: When Informed Investor Helps'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10536