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UID:716155b33aa78bbe661e2ce1891af7f4
CATEGORIES:Seminars
CREATED:20150211T190738
SUMMARY:Gabriele La Spada - Princeton University (Job Market Seminar)
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Competition, Reach for Yield, and Money Market Funds\nAbstract:\nDo asset m
 anagers reach for yield because of competitive pressures in a low rate envi
 ronment? I propose a tournament model of money market funds (MMFs) to study
  this issue. I show that funds with different costs of default respond diff
 erently to changes in interest rates, and that it is important to distingui
 sh the role of risk-free rates from that of risk premia. In an environment 
 in which funds care about relative performance, an increase in the risk pre
 mium leads funds with lower default costs to increase risk-taking, while fu
 nds with higher default costs reduce risk-taking. Without changes in the ri
 sk premium, low risk-free rates reduce risk-taking. I show that these predi
 ctions are consistent with the risk-taking of MMFs during the 2006-2008 per
 iod: When risk premia increased, funds with low sponsor's reputation concer
 ns increased risk-taking, while funds with high sponsor's reputation concer
 ns decreased risk-taking. Further, I confirm the differential role of risk-
 free rate and risk premium to explain changes in fund portfolios.\n
DTSTAMP:20260404T104614Z
DTSTART:20150128T173000Z
DTEND:20150128T190000Z
SEQUENCE:0
TRANSP:OPAQUE
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