Cyclical investment behavior across financial institutions

Arbeitspapier

This paper examines the investment behavior in debt securities across financial institutions with a particular focus on how they respond to price changes. For identification, we use security-level data from the German Microdatabase Securities Holdings Statistics. Our results suggest that banks and investment funds may destabilize the market by responding in a pro-cyclical manner to price changes. For investment funds, this effect was even stronger during the crisis and periods of high uncertainty. Insurance companies and pension funds buy securities after a drop in prices. They also buy securities that are trading at a discount and sell securities that are trading at premium. This counter-cyclical behavior may stabilize markets whenever prices have been pushed away from fundamentals. Since our results suggest that institutions with impermanent balance sheet characteristics may exacerbate price dynamics, it is of crucial importance for financial stability to monitor the investor base as well as the balance sheets of both levered and non-levered investors.

Angaben zum Objekt

• ISBN: 978-3-95729-242-1
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Bundesbank Discussion Paper ; No. 08/2016

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Current Account Adjustment; Short-term Capital Movements ; Portfolio Choice; Investment Decisions ; International Financial Markets ; Financial Institutions and Services: General
• Thema: Cyclicality ; Portfolio Allocation ; Financial Stability ; Debt Capital Flows

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Timmer, Yannick
• Ereignis: Veröffentlichung
• (wer): Deutsche Bundesbank
• (wo): Frankfurt a. M.
• (wann): 2016

Weitere Informationen

• Handle: http://hdl.handle.net/10419/130754
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ