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Investment funds and euro disaster risk

Author

Listed:
  • Longaric, Pablo Anaya
  • Cera, Katharina
  • Georgiadis, Georgios
  • Kaufmann, Christoph

Abstract

We document that compared to all other investor groups investment funds exhibit a distinctly procyclical behavior when financial-market beliefs about the probability of a euro-related, institutional rare disaster spike. In response to such euro disaster risk shocks, investment funds shed periphery but do not adjust core sovereign debt holdings. The periphery debt shed by investment funds is picked up by investors domiciled in the issuing country, namely banks in the short term and insurance corporations and households in the medium term. JEL Classification: F34, F45, G23

Suggested Citation

  • Longaric, Pablo Anaya & Cera, Katharina & Georgiadis, Georgios & Kaufmann, Christoph, 2025. "Investment funds and euro disaster risk," Working Paper Series 3029, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20253029
    Note: 3597820
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    More about this item

    Keywords

    euro disaster risk; investment funds; non-bank financial intermediation; sovereign debt markets;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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