We analyze the supply-side disruptions associated with COVID-19. We find that sectors in which a higher fraction of the workforce is not able to work remotely experienced greater declines in employment and expected revenue growth, worse stock market performance, and higher likelihood of default. The stock market overweights low-exposure industries. Thus, our findings cast light on the disconnect between stock market indices and aggregate outcomes. We combine these ex ante heterogeneous industry exposures with daily financial market data to create a stock return portfolio that tracks news about the supply-side disruptions resulting from the pandemic.

Are market experts prone to heuristics, and do these heuristics transfer across buying and selling domains? We investigate this question using a unique data set of institutional investors with portfolios averaging $573 million. A striking finding emerges: While there is evidence of skill in buying, selling decisions underperform substantially, even relative to random‐selling strategies. This holds despite the similarity between the two decisions in frequency, substance, and consequences for performance. Evidence suggests an asymmetric allocation of cognitive resources such as attention can explain the discrepancy: We document a systematic, costly heuristic process for selling but not for buying.

We study investor redemptions and portfolio rebalancing decisions of prime money market mutual funds (MMFs) during the Eurozone crisis. We find that sophisticated investors selectively acquire information about MMFs’ risk exposures to Europe, which leads managers to withdraw funding from information-sensitive European issuers. That is, MMF managers, particularly those serving the most sophisticated investors, selectively adjust their portfolio risk exposures to avoid information-sensitive European risks, while maintaining or increasing risk exposures to other regions. This mechanism helps to explain the occurrence of selective “dry-ups” in debt markets where delegation is common and returns to information production are usually low.