Cyclical Investment Behaviour across Financial Institutions
ECMI Papers from Centre for European Policy Studies
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
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Journal Article: Cyclical investment behavior across financial institutions (2018)
Working Paper: Cyclical investment behavior across financial institutions (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eps:ecmiwp:12747
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