. and lipson m. ( 1999 ), ‘ execution costs of institutional equity orders ’, journal of financial intermediation 8 : 123 - 140. see mitchell m., pulvino t. and stafford, e. ( 2004 ), ‘ price pressure around mergers ’, journal of finance 59 ( 1 ) : 31 - 63 ; estimates vary considerably. for example edelen et al. ( 2001 ) find a 0. 86 per cent price reduction on a single day on average ( edelen, r. m. and warner j. b. ( 2001 ) ‘ aggregate price effects of institutional trading : a study of mutual fund flow and market returns ’, journal of financial economics 59 : 195 : 220 ). coval et al. find a 2 per cent price reduction on a monthly basis ( coval, j. and stafford, e. ( 2007 ), ‘ asset fire sales ( and purchases ) in equity markets ’, journal of financial economics 86 : 479 - 512 ). shleifer a. and vishny, r. ( 2011 ), ‘ fire sales in finance and macroeconomics ’, journal of economic perspectives 25 ( 1 ) : 29 - 48. imf ( 2009 ), ‘ crisis and recovery ’, world economic outlook, april ; mishkin, f. s. ( 2011 ), ‘ over the cliff : from the subprime to the global financial crisis ’, journal of economic perspectives 25 ( 1 ) : 49 - 70. second, a size problem also exists in the case of non - bank financial institutions, albeit of a different nature than in that of banks. asset managers, insurers and pension funds provide agency services and hence they bear little credit, market or liquidity risks on their balance sheets compared with banks ; the risks are borne by their clients. for example, blackrock, the largest asset management company in the world, has around $ 6. 3 trillion of assets under management, but only $ 220 billion ( 3. 5 per cent ) of its own. clearly there is no ‘ too - big - to - fail ’ problem as in the banking industry. the problem of size here concerns the externalities produced by the asset managers ’ portfolio allocation. 5 the failure of a ‘ too - big - to - fail ’ asset manager may create systemic financial instability through its effects on markets. in the extreme event of a failure of a large asset manager, the massive sale of assets in its portfolio

. i. ben - david, f. franzoni, r. moussawi, and j. sedunov, ‘ the granular nature of large institutional investors ’, nber working paper no. 22247, may 2016. a multitude of investors diversifying their investments must end up with the same portfolios when the number of assets they can invest in is finite. while diversification helps institutional investors to reduce the risks of their investments, shocks tend to spread more easily across different institutions when portfolios overlap. 11 in europe, for example, investment funds invest more than three fourths ( 80 per cent ) of their assets in securities which are also held by insurers and pension funds. market stress can be more easily transmitted across markets and asset classes. 12 the risks and costs of fire sales in the event of market stress may end up being less easily diversifiable at the macro level. while investment funds, and to a certain extent insurers and pension funds, tend to diversify their portfolios across countries and sectors, banks invest a larger share of their assets in domestic securities. this simply reflects13 the different investment strategies of different financial intermediaries. banks specialise in resolving asymmetric information issues, so they end up with greater knowledge of specific markets and borrowers than other investors. they have a comparative advantage from investing in the markets that they know better. like asset correlations, business activity correlations can vary over the cycle, turning all positive or intensifying in bad times. there is also evidence that there are fewer contrarian investors in the market, or that investors traditionally considered as contrarian may behave pro - cyclically in episodes of severe market stress. 14 another sign of increasing risks is given by the fact that asset managers ’ activities have become structurally more correlated over the years, owing to the diffusion of common investment strategies across different business activities. new technologies ( hft, algo - trading and robo - advisors ) and financial products ( etfs ) have made intermediaries more procyclical and quicker to react to market news. the growth of electronic and automated trading has given rise to a series of flash episodes in markets that are among the largest and most liquid in the world. 15 what policy instruments are available to limit such risks? nanda v., wu w. and zhou x. ( 2018 ), ‘ investment commonality across insurance companies : fire sale risk and corporate yield spread ’, finance and economics discussion