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SUMMARY:Investor Flows and Fragility in Corporate Bond Funds
DTSTART:20160928T103000
DTEND:20160928T120000
DTSTAMP:20260502T062542Z
UID:5a8d778ab8899f9e4431cabe67b91d5389248bee51578c2ffd861aa1
CATEGORIES:Conferences - Seminars
DESCRIPTION:Itay GOLDSTEIN (Wharton)\nInvestment in bond mutual funds has 
 grown rapidly in recent years. With it\, there is a growing concern that t
 hey are a new source of potential fragility. While there is a vast literat
 ure on flows in equity mutual funds\, relatively little research has been 
 done on bond mutual funds. In this paper\, we explore flow patterns in cor
 porate-bond mutual funds. We show that their flows behave quite differentl
 y than those of equity mutual funds. While we confirm the well-known conve
 x shape for equity funds’ flow-to-performance over the period of our stu
 dy\, we show that during the same time\, corporate bond funds exhibit a co
 ncave shape: their outflows are sensitive to bad performance more than the
 ir inflows are sensitive to good performance. Moreover\, corporate bond fu
 nds tend to have greater sensitivity of outflows to bad performance when t
 hey have more illiquid assets and when the overall market illiquidity is h
 igh. These and other results we provide point to the possibility of fragil
 ity: The illiquidity of corporate bonds may generate a first mover advanta
 ge (or strategic complementarities) among investors in corporate-bond fund
 s\, amplifying their response to bad performance. We show that this behavi
 or appears also in aggregate and explore some potential consequences for t
 he real economy.
LOCATION:UNIL\, Extranef\, room 125 https://planete.unil.ch/plan/?local=EX
 T-125
STATUS:CONFIRMED
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