Bond price fragility and the structure of the mutual fund industry
We conjecture that mutual funds with large shares of outstanding bond issues are more inclined to internalize the negative price spillovers of fire sales and thus sell their holdings in those issues, to a lower extent, when they experience redemptions. We provide evidence consistent with this conjec...
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Veröffentlicht in: | The Review of financial studies 2024-07, Vol.37 (7), p.2063-2109 |
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Format: | Artikel |
Sprache: | eng |
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Online-Zugang: | Volltext |
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Zusammenfassung: | We conjecture that mutual funds with large shares of outstanding bond issues are more inclined to internalize the negative price spillovers of fire sales and thus sell their holdings in those issues, to a lower extent, when they experience redemptions. We provide evidence consistent with this conjecture and further show that ownership concentration limits bonds’ exposures to flow-induced fire sales. We exploit variation in negative spillovers arising from the Fed’s SMCCF to confirm the economic mechanism and explore our findings’ implications for fund performance and fire-sale spillovers to other funds. |
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ISSN: | 0893-9454 1465-7368 1465-7368 |
DOI: | 10.1093/rfs/hhad095 |