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Mariassunta Giannetti, Professor of Finance, Stockholm School of Economics
Tuesday 16 November 2021, 13:00-14:15
Online seminar – Bond returns and the trading of large mutual funds
- 👤 Speaker: Mariassunta Giannetti, Professor of Finance, Stockholm School of Economics
- 📅 Date & Time: Tuesday 16 November 2021, 13:00 - 14:15
- 📍 Venue: via zoom
Abstract
We show that mutual funds with a large share of a bond issue sell their holdings of that issue to a lower extent when they experience redemptions, arguably because they attempt to avoid a drop in the bond price and the consequent negative feedback effects on the unsold part of their position. As a consequence, bond issues with more concentrated ownership experience higher returns during periods of turmoil and have lower price volatility. We provide evidence that the stabilising trading of bond funds with a large share of an outstanding issue can help explain how the intervention of the Fed in the corporate bond market through the Secondary Market Corporate Credit Facility quickly stabilised both eligible and ineligible bonds.
Series This talk is part of the Finance Seminars, CJBS series.
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