Friday Seminar - "Monetary Policy and Fragility in Corporate Bond Funds" - John Kuong (INSEAD)
John Kuong, Assistant Professor of Finance at INSEAD, will present his research at SSE main building (Room A720) on Friday, October 13 at 10:30 CET.
Starttid:
2023-10-13 at 10:30
Sluttid:
2023-10-13 at 11:45
Plats:
Room A720, SSE main building, entrance via Bertil Ohlins Gata 4
"Monetary Policy and Fragility in Corporate Bond Funds"
Abstract: We document aggregate outflows from corporate bond funds days before and after the announcement of increases in the Federal Funds Target rate (FFTar). To rationalize this phenomenon, we build a model in which funds’ net-asset-values (NAVs) are stale and investors strategically redeem to profit from the mispricing when they learn about the increases of FFTar. Consistent with the model’s predictions, we find that stale NAVs and loose monetary policy environments weaken (strengthen) outflows sensitivity to increases in FFTar during illiquid (liquid) market conditions. Our results highlight when and how monetary policy could systematically exacerbate the fragility of corporate
bond funds.