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Flights to Safety

Author

Listed:
  • Lieven Baele
  • Geert Bekaert
  • Koen Inghelbrecht
  • Min Wei

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.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Lieven Baele & Geert Bekaert & Koen Inghelbrecht & Min Wei, 2020. "Flights to Safety," The Review of Financial Studies, Society for Financial Studies, vol. 33(2), pages 689-746.
    • Handle: RePEc:oup:rfinst:v:33:y:2020:i:2:p:689-746.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhz055
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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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