Do mutual fund flows affect the French corporate bond market? |
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| Institution: | 1. Banque de France, Financial Stability Directorate, 31 rue Croix des Petits Champs, 75001, Paris, France;2. European Central Bank, Directorate General of Macroprudential Policy and Financial Stability, Sonnemannstraße 20, 60314 Frankfurt am Main, Germany;1. Bangor University, UK;2. University of Durham, UK;3. ESCA School of Management, Morocco;4. Alliant International University, USA;1. School of Banking and Finance, University of International Business and Economics, Beijing, China;2. National School of Development, Peking University, Beijing, China;1. Institute of Business Administration, University of Sindh, Jamshoro, Pakistan;2. Department of Economics and Finance, Southern Illinois University Edwardsville Edwardsville, IL 62026-1102, USA;3. Department of Accounting and Finance, Monash Business School, Sunway Campus, Malaysia;4. Department of Economics & Finance, College of Business Administration, University of Hail, Saudi Arabia;5. Department of Commerce, University of Sindh, Jamshoro, Pakistan;1. CEREN EA 7477, Burgundy School of Business, Université Bourgogne Franche-Comté, Department of Accounting, Finance & Law, 29 Rue Sambin, 21000 Dijon, France;2. Athens University of Economics and Business, Department of Informatics, 76 Patission Str., Athens, 10434, Greece |
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| Abstract: | We study whether investors’ withdrawals from mutual funds affect corporate bond prices. As mutual funds have become major players in the financial markets, they are likely to exert downward pressures on asset prices when facing investors’ redemptions, particularly in the less liquid markets such as corporate bonds. We use a novel dataset on the French bond funds and show that both flows in and out of mutual funds lead to a significant effect on the corporate bond yields. This effect is asymmetric as redemptions provoke a change in yields of greater magnitude than inflows. Moreover, all corporate bonds are not equally affected by investors’ withdrawals from funds: The more a bond is detained by funds, the higher the impact of redemptions on its yield. These three results are robust to various changes in econometric specifications. |
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| Keywords: | Investment funds Mutual funds Corporate bonds Fund flows Financial stability G12 G23 |
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