ULME: Procyclical Asset Management, Reach for Yield, and Bond Risk Premia

Time : Thursday , 16:15 - 17:15 Uhr
Location : Raum 120, Helmholtzstr. 18,

Das Institut für Wirtschaftswissenschaften lädt herzlich ein zum nächsten Vortrag in diesem Wintersemester innerhalb des Forschungsseminars ULME. Der Vortrag findet am Donnerstag, 22. November,  16:15 - 17:15 Uhr (Raum  120, Helmholtzstrasse 18) statt. Gastredner ist diesmal Emanuel Mönch (Deutsche Bundesbank), der einen Vortrag mit dem Titel „Procyclical Asset Management, Reach for Yield, and Bond Risk Premia“ halten wird. Emanuel Mönch ist Head of Research der Deutschen Bundesbank und Kooptationsprofessor für Geldpolitik und Finanzmärkte an der Goethe Universität Frankfurt.

 

Abstract zum Vortrag:

Are low yields precipitating more risk-taking among investment managers? And does such behavior in turn affect the pricing of risk? We answer these questions using a comprehensive data set on the security-level holdings of over 4500 German retail and institutional investment funds. We document pervasive deliberate reach-for-yield across fund categories in response to declining risk-free rates and credit spreads. Fund managers are procyclical investors, purchasing higher-yielding securities when bond prices rise and rates fall. Negative yields amplify this tendency, particularly in funds offering capital-protection clauses which are deemed safer investments. Trading associated with reaching for yield has price impact, controlling for past returns, other sectors' demand, and a variety of security-specific information. Buying pressures raise bond returns for at least one year, while the price impact from selling pressures fades more quickly. In sum, we find strong evidence for feedback loops in bond risk premia that can be associated with asset managers reaching for yield.