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Cyclical Investment Behaviour across Financial Institutions

Yannick Timmer

ECMI Papers from Centre for European Policy Studies

Abstract: This paper contrasts the investment behavior of different financial institutions in debt securities as a response to price changes. For identification, I use unique security-level data from the German Microdatabase Securities Holdings Statistics. Banks and investment funds respond in a pro-cyclical manner to price changes. In contrast, insurance companies and pension funds act counter-cyclically; they buy after price declines and sell after price increases. The heterogeneous responses can be explained by differences in their balance sheet structure. I exploit within-sector variation in the financial constraint to show that tighter constraints are associated with relatively more pro-cyclical investment behavior.

Pages: 61 pages
Date: 2017-07
New Economics Papers: this item is included in nep-ban
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https://www.ceps.eu/publications/cyclical-investme ... nancial-institutions (application/pdf)

Related works:
Journal Article: Cyclical investment behavior across financial institutions (2018) Downloads
Working Paper: Cyclical investment behavior across financial institutions (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eps:ecmiwp:12747

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