Flights to safety

Lieven Baele, G.R.J. Bekaert, K. Inghelbrecht, Min Wei

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We identify flight-to-safety (FTS) days for twenty-three countries using only stock and bond returns and a model averaging approach. FTS days comprise less than 2% of the sample and are associated with a 2.7% average bond-equity return differential and significant flows out of equity funds and into government bond and money market funds. FTS represents flights to both quality and liquidity in international equity markets, but mainly a flight to quality in the U.S. corporate bond market. Emerging markets, endowment funds, and hedge funds perform poorly during FTS, whereas hedge funds appear to vary their systematic exposures prior to an FTS.
Original languageEnglish
JournalThe Review of Financial Studies
DOIs
Publication statusE-pub ahead of print - Jun 2019

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Safety
Flight to quality
Bond market
Hedge funds
Equity returns
Equity
Corporate bonds
Emerging markets
Government bonds
International equity markets
Bond returns
Endowments
Liquidity
Stock returns
Model averaging
Money market

Cite this

Baele, L., Bekaert, G. R. J., Inghelbrecht, K., & Wei, M. (2019). Flights to safety. The Review of Financial Studies. https://doi.org/10.1093/rfs/hhz055
Baele, Lieven ; Bekaert, G.R.J. ; Inghelbrecht, K. ; Wei, Min. / Flights to safety. In: The Review of Financial Studies. 2019.
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Flights to safety. / Baele, Lieven; Bekaert, G.R.J.; Inghelbrecht, K.; Wei, Min.

In: The Review of Financial Studies, 06.2019.

Research output: Contribution to journalArticleScientificpeer-review

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AB - We identify flight-to-safety (FTS) days for twenty-three countries using only stock and bond returns and a model averaging approach. FTS days comprise less than 2% of the sample and are associated with a 2.7% average bond-equity return differential and significant flows out of equity funds and into government bond and money market funds. FTS represents flights to both quality and liquidity in international equity markets, but mainly a flight to quality in the U.S. corporate bond market. Emerging markets, endowment funds, and hedge funds perform poorly during FTS, whereas hedge funds appear to vary their systematic exposures prior to an FTS.

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DO - 10.1093/rfs/hhz055

M3 - Article

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JF - The Review of Financial Studies

SN - 0893-9454

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