Mutual Fund Trading Style and Bond Market Fragility

• 成果类型: Article
• 署名作者: Anand, Amber; Jotikasthira, Chotibhak; Venkataraman, Kumar
• 署名单位: Syracuse University; Southern Methodist University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa120
• 发表日期: 2021
• 页码: 2993
• 关键词: INVESTOR FLOWS; liquidity; COSTS; TRANSPARENCY; search

摘要

We explore the link between mutual funds and fragility risk in the corporate bond market. We classify a fund's trading style based on its responses to signals of large dealer inventories. Trading style is persistent and the majority of funds demand liquidity. Notably, a subset of funds earn positive alpha by intentionally supplying liquidity during periods of sustained customer selling (with transitory price effects). Liquidity-supplying funds maintain their relative trading style when facing large outflows and elevated market stress, thus alleviating fragility risk. Our results add nuance to existing evidence that mutual funds pose a threat to market stability.