Postcrisis regulations apply stricter liquidity rules to both money market funds (MMFs) and banks, requiring MMFs to do more overnight lending and banks to borrow longer-term. MMFs and banks resolve this dilemma by developing a “bundling” strategy across overnight and longer term markets. In particular, MMFs increase longer term funding and charge a lower rate to banks that have recently accommodated MMFs’ overnight depositing needs. Such cross-market reciprocity is stronger between MMFs and foreign banks, which depend on MMFs for dollar funding more than U.S. banks do. MMFs with lower liquidity buffers and higher flow volatility are more likely to engage in bundling.

We investigate the stock price reactions of industry competitors to IPOs in China. Contrary to findings in the U.S., we document a positive valuation effect of Chinese IPOs from 2002 to 2013. This finding is robust to alternative rival definitions, investor reaction measurement, and sample selection criteria. Based on the existing theories and institutional setup of the Chinese stock market, we propose three non-competing hypotheses: the signaling hypothesis (i.e., IPOs could convey positive industry-related information), the collusion hypothesis (i.e., rival firms can benefit from the increasing likelihood of collusion), and the substitution hypothesis (i.e., rival stocks can substitute for IPO stocks as an appealing investment). With a series of tests, we demonstrate that the substitution hypothesis can explain this phenomenon. Furthermore, we find that the spillover effects of IPOs decline with the increase in investment choices after 2014.

Liquidity restrictions on investors, like the redemption gates and liquidity fees introduced in the 2016 money market fund (MMF) reform, are meant to improve financial stability. However, we find evidence that such liquidity restrictions exacerbated the run on prime MMFs during the COVID-19 crisis. Our results indicate that gates and fees could generate strategic complementarities among investors in crisis times. Severe outflows from prime MMFs led the Federal Reserve to intervene with the Money Market Mutual Fund Liquidity Facility (MMLF). Using MMLF microdata, we show how the provision of “liquidity of last resort” stabilized prime funds.

This paper investigates whether investors can earn higher profits by holding cryptocurrencies with higher downside risk. Both portfolio-level analyses and cryptocurrency-level cross-sectional regressions suggest a positive cross-sectional relation between downside risk and future returns in the cryptocurrency market. In addition to the risk-return tradeoff theory, the limits-to-arbitrage theory also has some explanatory power for these results. Moreover, we examine the source of downside risk premium, the existence of upside risk premium, as well as the intertemporal relation between downside risk and future returns. Collectively, our findings highlight the important role of downside risk in determining cryptocurrency prices.