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The paper provides empirical evidence on the effect of strategic complementarities on investors' behavior in financial markets. The authors derive empirical implications from a global-game model and test them using data on mutual fund outflows. Consistent with the theory, they find that in funds with illiquid assets (where complementarities are stronger), outflows are more sensitive to bad past performance than in funds with liquid assets; they also find that investors' behavior depends on the composition of the shareholder base. They present further evidence that these results are not attributable to alternative explanations that are based on information conveyed by past performance or on clientele effects.
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