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Granular Investors and International Bond Prices: Scarcity-Induced Safety

2022; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.4287955

1556-5068

Ester Faia, Juliana Salomão, Alexia Ventula Veghazy,

Banking stability, regulation, efficiency

Download This Paper Open PDF in Browser Add Paper to My Library Share: Permalink Using these links will ensure access to this page indefinitely Copy URL Granular Investors and International Bond Prices: Scarcity-Induced Safety 63 Pages Posted: 7 Dec 2022 See all articles by Ester FaiaEster FaiaGoethe University Frankfurt; Centre for Economic Policy Research (CEPR)Juliana SalomaoUniversity of Minnesota - Twin Cities - Carlson School of Management; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)Alexia Ventula VeghazyEuropean Central Bank (ECB) Date Written: November 28, 2022 Abstract With a unique dataset of euro area corporate bonds we study the role of large heterogeneous investors' demand on currency pricing. We document that while insurance and pension funds exhibit strong preferences for holding assets issued by local firms and denominated in home currency; mutual funds do not. Motivated by this segmentation, we estimate the impact of investor demand on euro-dollar return differentials (hedged and unhedged) for given security and issuer. These differentials decline as ECB asset purchases induce a drain in euro securities. A dynamic portfolio optimization model of bonds in different currencies, where heterogeneous risk-attitudes lead to UIP deviations and regulation to CIP ones, accounts for the facts. Keywords: heterogeneous mandates, large investors, market segmentation, securities data, uncovered and covered interest rate parity, scarcity channel, risk rebalance channel, asset safety JEL Classification: F3, G2, G4 Suggested Citation: Suggested Citation Faia, Ester and Salomao, Juliana and Veghazy, Alexia Ventula, Granular Investors and International Bond Prices: Scarcity-Induced Safety (November 28, 2022). Available at SSRN: https://ssrn.com/abstract=4287955 Ester Faia Goethe University Frankfurt ( email ) Grüneburgplatz 1Frankfurt am Main, 60323Germany Centre for Economic Policy Research (CEPR) ( email ) LondonUnited Kingdom Juliana Salomao (Contact Author) University of Minnesota - Twin Cities - Carlson School of Management ( email ) 19th Avenue SouthMinneapolis, MN 55455United States Centre for Economic Policy Research (CEPR) ( email ) LondonUnited Kingdom National Bureau of Economic Research (NBER) ( email ) 1050 Massachusetts AvenueCambridge, MA 02138United States Alexia Ventula Veghazy European Central Bank (ECB) ( email ) Sonnemannstrasse 22Frankfurt am Main, 60314Germany Download This Paper Open PDF in Browser Do you have a job opening that you would like to promote on SSRN? Place Job Opening Paper statistics Downloads 2 Abstract Views 4 PlumX Metrics Feedback Feedback to SSRN Feedback (required) Email (required) Submit If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday. Submit a Paper Section 508 Text Only Pages SSRN Quick Links SSRN Solutions Research Paper Series Conference Papers Partners in Publishing Jobs & Announcements Newsletter Sign Up SSRN Rankings Top Papers Top Authors Top Organizations About SSRN SSRN Objectives Network Directors Presidential Letter Announcements Contact us FAQs Copyright Terms and Conditions Privacy Policy We use cookies to help provide and enhance our service and tailor content. To learn more, visit Cookie Settings. This page was processed by aws-apollo-5dc in 0.258 seconds