Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/193584 
Authors: 
Year of Publication: 
2018
Series/Report no.: 
ESRB Working Paper Series No. 77
Publisher: 
European Systemic Risk Board (ESRB), European System of Financial Supervision, Frankfurt a. M.
Abstract: 
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.
Subjects: 
Portfolio Allocation
Investment Behavior
Financial Markets
Debt Securities
Balance Sheet Constraints
JEL: 
G11
G15
G12
G21
G22
G23
Persistent Identifier of the first edition: 
ISBN: 
978-92-9472-044-3
Document Type: 
Working Paper

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