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The portfolio of euro area fund investors and ECB monetary policy announcements

Author

Listed:
  • Bubeck, Johannes
  • Habib, Maurizio Michael
  • Manganelli, Simone

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 rebalancing 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. JEL Classification: G11, G15

Suggested Citation

  • Bubeck, Johannes & Habib, Maurizio Michael & Manganelli, Simone, 2017. "The portfolio of euro area fund investors and ECB monetary policy announcements," Working Paper Series 2116, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20172116
    Note: 334027
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    Cited by:

    1. Picón Aguilar, Carmen & Soares, Rodrigo Oliveira & Adalid, Ramón, 2020. "Revisiting the monetary presentation of the euro area balance of payments," Occasional Paper Series 238, European Central Bank.
    2. Bua, Giovanna & Dunne, Peter G. & Sorbo, Jacopo, 2019. "Money Market Funds and Unconventional Monetary Policy," Research Technical Papers 7/RT/19, Central Bank of Ireland.
    3. Bergant, Katharina & Fidora, Michael & Schmitz, Martin, 2018. "International capital flows at the security level – evidence from the ECB’s asset purchase programme," ECMI Papers 13926, Centre for European Policy Studies.
    4. Rafael Cezar & Maéva Silvestrini, 2018. "Impact of the ECB Quantitative Easing on the French International Investment Position," Working papers 701, Banque de France.
    5. Bergant, Katharina & Fidora, Michael & Schmitz, Martin, 2018. "International capital flows at the security level – evidence from the ECB’s asset purchase programme," ECMI Papers 13926, Centre for European Policy Studies.

    More about this item

    Keywords

    asset allocation; euro area; European Central Bank; investment funds; monetary policy;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F3 - International Economics - - International Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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