Arbeitspapier
Burned by leverage? Flows and fragility in bond mutual funds
Does leverage drive investor ows in bond mutual funds? Leverage can increase fund returns in good times, but it can also magnify investors' losses and their response to bad performance. We study bond fund ows to provide new evidence for the link between mutual fund leverage and financial fragility. We find that out ows are greater in leveraged funds during stressed periods and after bad performance, compared with unleveraged funds. We provide supporting evidence that leverage exacerbates the negative externality in investors' redemption decisions. In this regard, we find that fund managers in leveraged funds react more procyclically to net out ows compared with fund managers in unleveraged funds. Such procyclical security sales in leveraged funds may increase investors' first-mover advantages and their response to bad performance. These findings suggest that leverage amplifies fragility in the bond mutual fund sector.
- ISBN
-
978-92-899-4056-6
- Sprache
-
Englisch
- Erschienen in
-
Series: ECB Working Paper ; No. 2413
- Klassifikation
-
Wirtschaft
Financial Crises
Financial Institutions and Services: General
Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- Thema
-
bond funds
fund leverage
financial fragility
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Vivar, Luis Molestina
Wedow, Michael
Weistroffer, Christian P.
- Ereignis
-
Veröffentlichung
- (wer)
-
European Central Bank (ECB)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2020
- DOI
-
doi:10.2866/357677
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:45 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Vivar, Luis Molestina
- Wedow, Michael
- Weistroffer, Christian P.
- European Central Bank (ECB)
Entstanden
- 2020
Ähnliche Objekte (12)
The determinants of cash flows in Greek bond mutual funds
Regulation, leverage, and derivative use by mutual funds
Information costs and mutual fund flows
Bond mutual funds and complex investments
Safe, or not safe? Covered bonds and Bank Fragility
Risk-on/risk-off, capital flows, leverage, and safe assets
Seasonal asset allocation: Evidence from mutual fund flows
Consumer interest rates and retail mutual fund flows
Financial fragility in open-ended mutual funds : the role of liquidity management tools
Financial fragility in open-ended mutual funds: The role of liquidity management tools
Bond mutual funds vs. bond exchange traded funds: Evaluation of risk adjusted performance
Market fragility and the paradox of the recent stock-bond dissonance
The determinants of cash flows in Greek bond mutual funds
Regulation, leverage, and derivative use by mutual funds
Information costs and mutual fund flows
Bond mutual funds and complex investments
Safe, or not safe? Covered bonds and Bank Fragility
Risk-on/risk-off, capital flows, leverage, and safe assets
Seasonal asset allocation: Evidence from mutual fund flows
Consumer interest rates and retail mutual fund flows
Financial fragility in open-ended mutual funds : the role of liquidity management tools
Financial fragility in open-ended mutual funds: The role of liquidity management tools
Bond mutual funds vs. bond exchange traded funds: Evaluation of risk adjusted performance
Market fragility and the paradox of the recent stock-bond dissonance
The determinants of cash flows in Greek bond mutual funds
Regulation, leverage, and derivative use by mutual funds
Information costs and mutual fund flows
Bond mutual funds and complex investments
Safe, or not safe? Covered bonds and Bank Fragility
Risk-on/risk-off, capital flows, leverage, and safe assets
Seasonal asset allocation: Evidence from mutual fund flows
Consumer interest rates and retail mutual fund flows
Financial fragility in open-ended mutual funds : the role of liquidity management tools
Financial fragility in open-ended mutual funds: The role of liquidity management tools
Bond mutual funds vs. bond exchange traded funds: Evaluation of risk adjusted performance