Flights to Safety

By Lieven Baele, Geert Bekaert, Koen Inghelbrecht, Min Wei. The Review of financial studies, 2014

284 citations recorded by the source corpus.

We identify flight-to-safety (FTS) days for twenty-three countries using only stock and bond returns and a model averaging approach. FTS days comprise less than 2% of the sample and are associated with a 2.7% average bond-equity return differential and significant flows out of equity funds and into government bond and money market funds. FTS represents flights to both quality and liquidity in international equity markets, but mainly a flight to quality in the U.S. corporate bond market. Emerging markets, endowment funds, and hedge funds perform poorly during FTS, whereas hedge funds appear to vary their systematic exposures prior to an FTS. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Subfields: Statistics and Probability

View Paper: https://www.semanticscholar.org/paper/2532e9288c7cd6c7f0aab2e52166dac765ad1d84

Citations in the corpus

• Nonlinearity and Flight‐to‐Safety in the Risk‐Return Trade‐Off for Stocks and Bonds (2019, unknown): “(2009), Baele et al. (2013)). Economic theories of investor flight-to-safety predict highly nonlinear asset pricing relationships (Vayanos (2004), Weill (2007), Caballero and Krishnamurthy (2008), Brunnermeier and Pedersen (2009)).”
• The Time Variation in Risk Appetite and Uncertainty (2019, unknown): “In addition, models outside of expected utility frameworks, such as prospect theory with probability weighting (Baele et al. 2019) or models featuring biased expectations or beliefs (Lochstoer and Muir 2021), may provide plausible alternative explanations for the data.”