The portfolio of euro area fund investors and ECB monetary policy announcements. (December 2018)

• Record Type: Journal Article
• Authors: Bubeck, Johannes; Habib, Maurizio Michael; Manganelli, Simone
• Is Part Of: Journal of international money and finance. Volume 89(2018)
• Page Start: 103
• Page End: 126
• Publication Date: 2018-12
• Subjects: E2 -- F3 -- G11 -- G15; Unconventional monetary policy -- Asset allocation -- Portfolio theory -- European Central Bank -- Investment funds; International finance -- Periodicals; Foreign exchange -- Periodicals; Finances internationales -- Périodiques; Change -- Périodiques; Foreign exchange; International finance; Periodicals; 332.04205
• DOI: 10.1016/j.jimonfin.2018.08.014
• Languages: English
• ISSNs: 0261-5606

Abstract

Abstract: This paper studies the impact of major ECB monetary policy announcements on the portfolio allocation of euro area fund investors, using daily data between 2012 and mid-2016, a period that includes a variety of unconventional measures. We distinguish between active portfolio reallocation, driven by redemptions or injections of investors, and passive portfolio rebalancing, triggered by valuation effects related to changes in asset prices and exchange rates. We find that, for this class of fund investors, policy announcements work mainly through valuation effects (the signalling channel), rather than via active reallocation (the portfolio balance channel). Notably, since the autumn of 2014, monetary policy shocks triggered large asset price and exchange rate effects and prompted a passive shift of euro area investors into riskier assets, in particular European and Emerging Market equity funds and out of bond funds.