Cash holdings lessen chance of ‘forced sales’ by mutual funds, paper says

Bank of Italy

A working paper published by the Bank of Italy examines the potential for liquidity mismatches between assets and liabilities for open-ended mutual funds.

In Liquidity transformation and financial stability: evidence from the cash management of open-end Italian mutual funds, Nicola Branzoli and Giovanni Guazzarotti use data on the characteristics and portfolios of the funds from the supervisory reports of the Bank of Italy.

The authors find lagged cash holdings “reduce the probability that a

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