Work

Bond Price Fragility and the Structure of the Mutual Fund Industry

Year: 2024

Type: article

Abstract: We conjecture that mutual funds with large shares of outstanding bond issues are more inclined to internalize the negative price spillovers of fire sales and thus sell their holdings in those issues, to a lower extent, when they experience redemptions. We provide evidence consistent with this conjecture and further show that ownership concentration limits bonds’ exposures to flow-induced fire sales. We exploit variation in negative spillovers arising from the Fed’s SMCCF to confirm the economic mechanism and explore our findings’ implications for fund performance and fire-sale spillovers to other funds.

Source: Review of Financial Studies

DOI: 10.1093/rfs/hhad095

Authors: Mariassunta Giannetti, Chotibhak Jotikasthira

Institutions: Stockholm School of Economics, Southern Methodist University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $4,229

OpenAlex ID: W4393076901