Search Options
Home Media Explainers Research & Publications Statistics Monetary Policy The €uro Payments & Markets Careers
Suggestions
Sort by

Alexandru Barbu

15 March 2021
WORKING PAPER SERIES - No. 116
Details
Abstract
We use unique institutional securities holdings data to examine the trading behaviour of delegated institutional capital and its impact on bond risk premia. We show that institutional fund managers trade strongly procyclically: they actively move into higher yielding, longer duration and lower rated securities as yields fall and spreads compress, and vice versa. Funds more exposed to negative yields increase their risk-taking more strongly, and this effect is particularly pronounced for those offering explicit minimum return guarantees. Institutional funds' investments have large and persistent price impact in both corporate and sovereign bond markets. We provide evidence that this procyclical behaviour is driven by career concerns among institutional fund managers.
JEL Code
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects