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September 10, 2025Management Science

Active Liquidity Management, Strategic Complementarities, and Market Price of Liquidity

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Increased market stress leads equity mutual funds to enhance portfolio liquidity, indicating a strategic response.
Funds more exposed to strategic complementarities preserve liquidity more intensely, highlighting risk management dynamics.
Illiquidity ranks within a fund’s portfolio dictate rebalancing decisions during redemptions, affecting market outcomes.
Stocks from funds that are more fragile and have higher illiquidity see greater returns during times of market stress.

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Implication

This analysis reveals how market uncertainty affects the liquidity premium in equity mutual funds, suggesting implications for fund performance amidst redemptions.

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Aleksandra Rzeźnik (2025) studied this question.

synapsesocial.com/papers/68c188579b7b07f3a0612466 https://doi.org/10.1287/mnsc.2022.02095

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Implication

This analysis reveals how market uncertainty affects the liquidity premium in equity mutual funds, suggesting implications for fund performance amidst redemptions.

Active Liquidity Management, Strategic Complementarities, and Market Price of Liquidity

Key Points

Discussion

Implication

Cite This Study

Active Liquidity Management, Strategic Complementarities, and Market Price of Liquidity

Key Points

Discussion

Implication

Cite This Study

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