Financial Fragility in the COVID-19 Crisis: The Case of Investment Funds in Corporate Bond Markets
By Antonio Falato, Itay Goldstein, Ali Hortaçsu. Social Science Research Network, 2020
234 citations recorded by the source corpus.
Abstract Using daily microdata, we document major outflows in corporate-bond funds during the COVID-19 crisis. Large outflows were sustained over weeks and most severe for funds with illiquid assets, vulnerable to fire sales, and exposed to sectors hurt by the crisis. By providing a liquidity backstop for their bond holdings, the Federal Reserve bond purchase program helped to reverse outflows especially for the most fragile funds. In turn, the program had spillover effects on primary market issuance and peer funds. The evidence points to a “bond-fund fragility channel” whereby the Fed liquidity backstop transmits to the real economy via funds.
View Paper: https://www.semanticscholar.org/paper/a05188e05026767d21145ef96392031e280c8da7
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
- Stefan Nagel
- Zhiguo He
- Zhaogang Song
- Arvind Krishnamurthy
- Javier Bianchi
- Kent D. Daniel
- David A. Hirshleifer
- Björn Imbierowicz
Citations in the corpus
- Treasury inconvenience yields during the COVID-19 crisis (2020, background): “…Boyarchenko et al. (2020) , D’Amico et al. (2020) , Haddad et al. (2020) , Kargar et al. (2020) , Qiu and Nozawa (2020) , and O’Hara and Zhou (2020) on corporate bonds, Chen et al. (2021) on agency mortgage-backed securities, and Falato et al. (2020) and Ma et al. (2020) on bond mutual funds.”
- In sickness and in debt: The COVID-19 impact on sovereign credit risk (2020, unknown): “…and financial markets, including corporate fixed income ( O’Hara and Zhou, 2020; Haddad et al., 2020; Kargar et al., 2020; Boyarchenko et al., 2020; Fahlenbrach et al., 2020; Falato et al., 2020 ), Treasury ( He et al., 2020; Fleming and Ruela, 2020; Schrimpf et al., 2020 ), stock ( Boudoukh et…”
- Mutual Fund Performance and Flows during the COVID-19 Crisis (2020, unknown): “According to Falato, Goldstein, and Hortacsu (2020), between February and March 2020, the average corporate bond fund experienced cumulative outflows of about 9% of assets, a percentage much larger than the outflows we document for equity funds.”