FRIC/Finance Seminar with Mariassunta Giannetti, Stockholm School of Economics
The Department of Finance and FRIC, Center for Financial Frictions, are proud to announce the upcoming seminar with Mariassunta Giannetti, Stockholm School of Economics.
Mariassunta Giannetti will present:
Bond Returns and the Trading of Large Mutual Funds
We show that mutual funds with a large share of a bond issue sell their holdings of that issue to a lower extent when they experience redemptions, arguably because they attempt to avoid negative effects on the bond price, which would feedback on their performance. As a consequence, bond issues with more concentrated ownership experience higher returns during periods of turmoil and have lower price volatility. We provide evidence that the stabilizing trading of bond funds with a large share of an outstanding issue can help explain how the intervention of the Fed in the bond market through the Secondary Market Corporate Credit Facility quickly stabilized both eligible and ineligible bonds.
More information will follow.