NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Flights to Safety

Lieven Baele, Geert Bekaert, Koen Inghelbrecht, Min Wei

NBER Working Paper No. 19095
Issued in May 2013, Revised in May 2019
NBER Program(s):Asset Pricing Program

We identify flight-to-safety (FTS) days for 23 countries using only stock and bond returns and a model averaging approach. FTS days comprise less than 2% of the sample, and are associated with a 2.7% average bond-equity return differential and significant flows out of equity funds and into government bond and money market funds. FTS represents flights to both quality and liquidity in international equity markets, but mainly a flight-to-quality in the US corporate bond market. Emerging markets, endowment funds, and hedge funds all perform poorly during FTS, while hedge funds appear to vary their systematic exposures prior to a FTS.

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Document Object Identifier (DOI): 10.3386/w19095

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