Cyclical investment behavior across financial institutions
No 77, ESRB Working Paper Series from European Systemic Risk Board
This paper contrasts the investment behavior of different financial institutions in debt securities as a response to past returns. For identification, I use unique security-level data from the German Micro-database Securities Holdings Statistics. Banks and investment funds respond in a pro-cyclical manner to past security-specific holding period returns. In contrast, insurance companies and pension funds act counter-cyclically; they buy when returns have been negative and sell after high returns. 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. JEL Classification: G11, G15, G12, G21, G22, G23
Keywords: balance sheet constraints; debt securities; financial markets; investment behavior; portfolio allocation (search for similar items in EconPapers)
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Journal Article: Cyclical investment behavior across financial institutions (2018)
Working Paper: Cyclical Investment Behaviour across Financial Institutions (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:srk:srkwps:201877
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