Investment funds hold a disproportionately larger fraction of domestic relative to foreign stocks. Stock market development and familiarity (language and distance) are considered key determinants for home bias. The literature neglects however that investors often invest in foreign funds...

This joint ECB-DNB Occasional Paper aims to inform the ongoing discussions about an EU-level framework for operationalising macroprudential leverage limits for alternative investment funds (AIFs). It builds on, and extends, the analysis of an ECB-DNB special feature article published in the...

Does leverage drive investor ows in bond mutual funds? Leverage can increase fund returns in good times, but it can also magnify investors' losses and their response to bad performance. We study bond fund ows to provide new evidence for the link between mutual fund leverage and financial...

Using a sample of open-end corporate bond funds domiciled in the euro area, we exploit the COVID-19 market turmoil in March 2020 to examine two channels through which liquidity buffers can reduce procyclicality in the investment fund sector. First, we find that liquidity buffers reduced outflows...

This paper examines the use of ETFs by open-ended investment funds in the euro area to manage liquidity. We find that during the COVID-19 market turmoil, investment funds were the most run-prone investor type in the market for ETFs. We also show that open-ended funds that faced larger outflows...

Using supervisory data of alternative investment funds investing in bonds, I exploit the COVID-19 crisis to examine the effectiveness of redemption restrictions. First, I find that redemption restrictions reduced outflows during the March 2020 market turmoil but did not result in higher outflows...

The market turmoil in March 2020 highlighted key vulnerabilities in the EU money market fund (MMF) sector. This paper assesses the effectiveness of the EU's regulatory framework from a financial stability perspective, based on a panel analysis of EU MMFs at a daily frequency. First, we find that...

By applying a structural demand model to unique consumer-level survey data from the euro area, we assess how different CBDC design options, combined with individual (revealed) preferences, influence the potential demand for a digital euro. Estimating the demand for a digital euro, we find that...

The subprime crisis revealed that the adoption of suitable systems for the management of credit risk is of utmost concern. The Basel Committee on Banking Supervision (2009) advises banks to use credit portfolio models with caution when assessing the capital adequacy. This paper investigates...

This paper investigates the contribution of capital markets to international risk sharing in the euro area over the 2000Q1-2021Q1 period. It provides three main contributions: First, the estimation of country-specific vector autoregressions (VAR) shows that shock absorption through capital...