Procyclical Behavior of Institutional Investors During the Recent Financial Crisis: Causes, Impacts, and Challenges
AbstractThis paper (i) provides evidence on the procyclical investment behavior of major institutional investors during the global financial crisis; (ii) identifies the main factors that could account for such behavior; (iii) discusses the implications of procyclical behavior; and (iv) proposes a framework for sound investment practices for long-term investors. Such procyclical investment behavior is understandable and may be considered rational from an individual institutionâ€™s perspective. However, our main conclusion is that behaving in a manner consistent with longterm investing would lead to better long-term, risk-adjusted returns and, importantly, could lessen the potential adverse effects of the procyclical investment behavior of institutional investors on global financial stability.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 13/193.
Date of creation: 11 Sep 2013
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- NEP-ALL-2013-10-02 (All new papers)
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