Monetary Policy and Fragility in Corporate Bond Funds
Research output: Conference Papers › RGC 33 - Other conference paper
Author(s)
Related Research Unit(s)
Detail(s)
| Original language | English |
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| Publication status | Presented - 6 Jun 2024 |
Conference
| Title | 16th Annual Paul Woolley Centre Conference and 4th Annual Conference on Non-Bank Financial Sector and Financial Stability |
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| Location | London School of Economics and Political Science |
| Place | United Kingdom |
| City | London |
| Period | 6 - 7 June 2024 |
Link(s)
| Permanent Link | https://scholars.cityu.edu.hk/en/publications/publication(3e8bfca5-6115-4b91-b3cf-452a4b388d8a).html |
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Abstract
We document aggregate outflows from corporate bond funds days before and after the announcement of increases in the Federal Funds Target rate (FFTar). To rationalize this phenomenon, we build a model in which funds’ net-asset-values (NAVs) are stale and investors strategically redeem to profit from the mispricing when they learn about the increases of FFTar. Consistent with the model’s predictions, we find that stale NAVs and loose monetary policy environments weaken (strengthen) outflows sensitivity to increases in FFTar during illiquid (liquid) market conditions. Our results highlight when and how monetary policy could systematically exacerbate the fragility of corporate bond funds.
Research Area(s)
Bibliographic Note
Information for this record is supplemented by the author(s) concerned.
Citation Format(s)
Monetary Policy and Fragility in Corporate Bond Funds. / Kuong, John; O'Donovan, James; Zhang, Jinyuan.
2024. 16th Annual Paul Woolley Centre Conference and 4th Annual Conference on Non-Bank Financial Sector and Financial Stability, London, United Kingdom.
2024. 16th Annual Paul Woolley Centre Conference and 4th Annual Conference on Non-Bank Financial Sector and Financial Stability, London, United Kingdom.
Research output: Conference Papers › RGC 33 - Other conference paper
