Finance Seminar - John Kuong (INSEAD)
09 November 2022, 4:00 pm–5:15 pm
John Kuong (INSEAD) will present at this Finance Seminar.
Event Information
Open to
- All
Organiser
-
Ming Yang
Title: Monetary Policy and Corporate Bond Fund Fragility
Abstract: This paper examines flow patterns in corporate bond mutual funds under different monetary policy environments. We build a model of fund investors’ strategic redemption decisions in face of uncertain future interest rates, uncovering a novel outflow-to-interest-rate relationship. Consistent with the model's predictions, we empirically find that (i) outflows from funds increase when the target Fed funds rate increases, (ii) the outflow-to-interest-rate sensitivity is larger under loose monetary policy environments, and (iii) the additional sensitivity induced by loose monetary policy is greater when the market is more liquid. Our results suggest that fragility in corporate bond funds could be an important unintended consequence of monetary policy.
Location: Drayton House B20 Jevons LT. or Join via Zoom https://ucl.zoom.us/j/7364873755?pwd=QzNUeUpnNit2U2JMZnpZbmZwV2pZdz09 | Meeting I.D: 736 487 3755 | Passcode: CFF
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For more information, please, visit the Centre for Finance's website: http://centreforfinance.org/