Citation

Discussion Paper Details

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Title: Where do institutional investors seek shelter when disaster strikes? Evidence from COVID-19

Author(s): Simon Glossner, Pedro Pinto Matos, Stefano Ramelli and Alexander F Wagner

Publication Date: July 2020

Keyword(s): Coronavirus, corporate cash holdings, Corporate Debt, COVID-19, ESG, Institutional Ownership, leverage, Retail investors and tail risk

Programme Area(s): Financial Economics

Abstract: During the COVID-19 market crash, U.S. stocks with higher institutional ownership -- in particular, those held more by active, short-term, and more exposed institutions -- performed worse. Portfolio changes through the first quarter of 2020 reveal that institutional investors prioritized corporate financial strength over "soft" environmental and social performance. Trading data from a large discount brokerage (Robinhood) confirm that retail investors acted as liquidity providers. The effects did not reverse in the second quarter. Overall, the results suggest that when a tail risk realizes, institutional investors amplify price crashes by fire-selling and seeking shelter in "hard" measures of firm resilience.

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Bibliographic Reference

Glossner, S, Matos, P, Ramelli, S and Wagner, A. 2020. 'Where do institutional investors seek shelter when disaster strikes? Evidence from COVID-19'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15070