Whose Asset Sales Matter?

By Rhys M. Bidder, Jamie Coen, Caterina Lepore, Laura Silvetri

August 2, 2024

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Format: Chicago

Rhys M. Bidder, Jamie Coen, Caterina Lepore, and Laura Silvetri. Whose Asset Sales Matter?, (USA: International Monetary Fund, 2024) accessed September 26, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Asset and liability management, Bonds, Financial institutions, Hedge funds, Liquidity, Mutual funds, Sovereign bonds

Keywords: Asset sale, Bonds, Financial stability, Fire sales, Fixed income, Hedge funds, Liquidity, Mutual funds, Noise trader, Pressure measure, Price impact, Sales by dealer, Sovereign bonds, Traders' sale

Publication Details

Pages:

49
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/168
Stock No:

WPIEA2024168
ISBN:

9798400287091
ISSN:

1018-5941

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