Chapter

Responding to the Bear Market: Money Market Funds

Matthew P. Fink

in The Rise of Mutual Funds

Second edition

Published in print January 2011 | ISBN: 9780199753505
Published online January 2012 | e-ISBN: 9780199918805 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199753505.003.0005
Responding to the Bear Market: Money Market Funds

More Like This

Show all results sharing this subject:

  • Macroeconomics and Monetary Economics

GO

Show Summary Details

Preview

This chapter discusses the impact of the 1970s bear market on the mutual fund industry. Just as three decades of a strong stock market, from 1940 to 1970, spurred mutual fund growth, the prolonged bear market of the 1970s devastated mutual funds. Fund assets plummeted due to falling portfolio values and net redemptions of fund shares. The 1970s were also a terrible time for consumers, who paid high interest rates on their borrowings but were limited by federal law to receiving low interest rates on their savings. The mutual fund industry turned lemons into lemonade by sponsoring money market funds, which earned high short-term rates that were passed on to shareholders. Money market funds enjoyed spectacular success and revolutionized the fund industry and the entire American financial system.

Keywords: mutual fund industry; mutual funds; bear market; interest rates; money market funds

Chapter.  5781 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

Full text: subscription required

How to subscribe Recommend to my Librarian

Buy this work at Oxford University Press »

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.