Investor redemptions and fund manager sales of emerging market bonds: how are they related?

Jimmy Shek, Ilhyock Shim and Hyun Song Shin

No 509, BIS Working Papers from Bank for International Settlements

Abstract: Lending to emerging market economies (EMEs) through bond purchases has surged since 2009. What are the risks of a sudden stop? Bond mutual funds may curtail credit through two channels. The first is redemptions by ultimate investors. The second is additional discretionary sales by fund managers, over and above any sales implied by redemptions. In an empirical analysis of EME bond funds, we find that discretionary sales tend to reinforce the sales due to investor redemptions, and that 100 dollars' worth of bond sales due to investor redemptions is accompanied by roughly 10 dollars' worth of discretionary bond sales. We also find that 100 dollars' worth of EME international bond sales is associated with around 4 dollars' worth of valuation losses. Finally, a 1 percentage point increase in the yield of local currency bonds is associated with a 10% decline in the dollar value of bond holdings.

Keywords: Emerging market; sudden stop; financial crisis; global liquidity reversal; investor redemption (search for similar items in EconPapers)
Pages: 52 pages
Date: 2015-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

Downloads: (external link)
http://www.bis.org/publ/work509.pdf Full PDF document (application/pdf)
http://www.bis.org/publ/work509.htm (text/html)

Related works:
Journal Article: Investor Redemptions and Fund Manager Sales of Emerging Market Bonds: How Are They Related?* (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:509

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().