The role of institutional investors in propagating the crisis of 2007–2008

Alberto Manconi (), Massimo Massa and Ayako Yasuda

Journal of Financial Economics, 2012, vol. 104, issue 3, 491-518

Abstract: Using novel data on investors' bond portfolios, we study the contagion of the crisis from securitized bonds to corporate bonds. When securitized bonds became “toxic” in August 2007, mutual funds retained the now illiquid securitized bonds and sold corporate bonds. Funds with negative flows or high liquidity needs liquidated more than others. Yield spreads increased more for corporate bonds whose pre-crisis bondholders were more heavily exposed to securitized bonds, compared to same-issuer bonds held by unexposed investors. The findings suggest that liquidity-constrained investors with exposure to securitized bonds played a role in propagating the crisis from securitized to corporate bonds.

Keywords: Crisis transmission; Securitized bonds; Corporate bonds; Liquidity channel (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G21 G22 G23 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (136)

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Related works:
Chapter: The Role of Institutional Investors in Propagating the Crisis of 2007–2008 (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:104:y:2012:i:3:p:491-518

DOI: 10.1016/j.jfineco.2011.05.011

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