Redemption risk and cash hoarding by asset managers

Stephen Morris, Ilhyock Shim, Hyun Song Shin

Research output: Contribution to journalArticlepeer-review

45 Scopus citations


Open-end mutual funds face investor redemptions, but the sale of the underlying assets depends on asset managers’ portfolio decisions. If asset managers use cash holdings as a buffer to meet redemptions, they can mitigate fire sales of the assets. If they hoard cash in response to redemptions, they will amplify fire sales. We present a global game model of investor runs and identify conditions under which asset managers hoard cash. In an empirical investigation of bond mutual funds, we find that cash hoarding is the rule rather than the exception, and that less liquid bond funds display stronger cash hoarding.

Original languageEnglish (US)
Pages (from-to)71-87
Number of pages17
JournalJournal of Monetary Economics
StatePublished - Aug 2017

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


  • Asset manager
  • Bond market liquidity
  • Cash hoarding
  • Global game
  • Investor redemption


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