Hedge funds and dealers have outsized price impact – BoE paper
Mutual funds have smaller impact so may not play central role in fire sales, authors say
Hedge funds and dealers have a larger impact on prices when they are selling assets than other kinds of firm, research by the Bank of England finds.
The results highlight the role hedge funds and dealers have played in recent bouts of market stress, while casting doubt on whether mutual funds are similarly to blame. Though mutual funds have often been accused of worsening fire sales, the working paper finds they play a relatively small role.
Authors Rhys Bidder, Jamie Coen, Caterina Lepore and
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