Risk, Uncertainty, and the Perceived Threat of Terrorist Attacks: Evidence of Flight-to-Quality

Pagano, Michael S.; Strother, T. Shawn

doi:10.1142/s2010139213500079

Cited by 4 publications

(1 citation statement)

References 16 publications

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“…The flight-to-quality phenomenon has been attracting considerable scientific interest (Jones 2012;Briere, Chapelle, and Szafarz 2012;Rösch and Kaserer 2013;Pagano and Strother 2013;Psillaki and Eleftheriou 2014;Chabot 2014;Guerrieri and Shimer 2014). In spite of the continuous reappearance of flight-to-quality events along the economic history, the first mention related to these phenomena was made only less than two decades ago by Bernanke, Gertler, and Gilchrist (1996).…”

Section: Introductionmentioning

confidence: 99%

Typology for flight-to-quality episodes and downside risk measurement

Gubareva

Borges

2015

Applied Economics

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We propose a total return-based framework to measure downside risk associated with phenomenon of capital outflows from riskier to safer financial markets. The proposed method consists of three elements: (i) the general definition of the flight-to-quality (FtQ) phenomenon, (ii) the typological classification of the flight-to-quality occurrences for associating them with the phases of the business cycle and (iii) the automated technique to diagnose the time frames and to measure the impact of flight-to-quality on financial instruments. The proposed framework is applied to analyse the global-scale capital inflows/outflows from emerging markets public debt to the US Treasuries and vice versa. The results show that different phases of business cycles and GDP growth rates, including turning points, could be associated with flights-to-quality of different types and causality origins. Addressing downside risk crystallizations in flight-to-quality occurrences, new perspectives of integrated interest rate risk and credit risk management are discussed. For strengthening financial stability, we suggest the use of flight-to-quality windows as scenarios for stress testing, both for banks and financial institutions.

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Section: Introductionmentioning

confidence: 99%

Typology for flight-to-quality episodes and downside risk measurement

Gubareva

Borges

2015

Applied Economics

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Foreign portfolio investment and the US macroeconomic conditions

Motie

Zeng

2023

The North American Journal of Economics and Finance

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Money Market Funds and the Prospect of a US Treasury Default

Gallagher¹,

Collins

2016

Quart. J. of Fin.

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US debt ceiling crises in 2011 and 2013 were marked by significant outflows from money market funds (MMFs). This study evaluates the behavior and motivations of investors redeeming from MMFs during these crises. We find that the majority of redemptions reflect a generalized flight-to-liquidity and are, therefore, primarily a function of the liquidity needs of a fund’s investor base. Funds holding Treasury securities at greatest risk of default or with market values below their $1 share price experience flows that are insignificantly different from other funds, all else equal. We also find evidence that a significant portion of the outflows stem, not from liquidity concerns, but from an opportunistic yield play on the repo market created by the crises. Finally, we offer anecdotal evidence that the government’s guarantee of bank deposits had the perverse effect of encouraging outflows from MMFs during the 2011 crisis.

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Risk, Uncertainty, and the Perceived Threat of Terrorist Attacks: Evidence of Flight-to-Quality

Cited by 4 publications

References 16 publications

Typology for flight-to-quality episodes and downside risk measurement

Typology for flight-to-quality episodes and downside risk measurement

Foreign portfolio investment and the US macroeconomic conditions

Money Market Funds and the Prospect of a US Treasury Default

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