Abstract
Abstract
This paper examines whether ETFs are a unique source of corporate bond fragility. Relative to mutual funds, ETFs cater to high-liquidity-demand investors, facilitate positive feedback strategies, and transmit outflows to corporate bonds via near-proportional trading. Comparing yield spread changes of bonds from the same issuer, we show that ETFs create flow-induced pressure during the Taper Tantrum, a period of market turmoil. Redemptions used to maintain the relative price efficiency of the largest and most liquid ETFs lead to significantly higher yield spreads for 4 months before reverting. The pattern indicates ETFs amplify the effects of negative fundamental shocks.
Publisher
Oxford University Press (OUP)
Subject
Economics and Econometrics,Finance,Accounting
Reference65 articles.
1. Dealer Balance Sheet Capacity and Market Liquidity during the 2013 Selloff in Fixed Income Markets
2. Liquidity and leverage;Adrian,;Journal of Financial Intermediation,2010
3. Fallen angels and price pressure;Ambrose,;Journal of Fixed Income,2012
4. Illiquidity and stock returns: Cross-section and time-series effects;Amihud,;Journal of Financial Markets,2002
5. Do buy-side institutions supply liquidity in bond markets? Evidence from mutual funds;Anand,;Review of Financial Studies
Cited by
15 articles.
订阅此论文施引文献
订阅此论文施引文献，注册后可以免费订阅5篇论文的施引文献，订阅后可以查看论文全部施引文献