Whose Asset Sales Matter?

Rhys Bidder, Jamie Coen, Caterina Lepore and Laura Silvetri

No 2024/168, IMF Working Papers from International Monetary Fund

Abstract: Using novel data on bond trading in the UK, we develop a new measure of selling pressure that can be applied to any trader. We identify exogenous selling pressure in a bond using traders’ sales of other, unrelated bonds.The price impact of a sale depends on who is selling: sales by dealers and hedge funds generate significantly larger impacts than equally sized sales by other investors. We rationalise our findings using a model of differentially informed investors. All else equal, our results suggest that more attention should be devoted to risks to financial stability from these impactful sellers.

Keywords: fire sales; liquidity; fixed income; financial stability; asset sale; price impact; traders' sale; sales by dealer; noise trader; pressure measure; Bonds; Hedge funds; Mutual funds; Sovereign bonds (search for similar items in EconPapers)
Pages: 49
Date: 2024-08-02
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