Fund trading on U.S. Treasuries and fund flows: Liquidity Risk Management Rule
| DepVar: . | NetBuy (US Treasuries)|$_{f,q}$| . | |||
|---|---|---|---|---|
| . | U.S. low-LMI funds . | Other funds . | ||
| . | (1) . | (2) . | (3) . | (4) . |
| |$Fund\ Flow_{f,q} \times After$| | 0.594*** | 0.613*** | –0.053 | –0.053 |
| (4.8) | (4.6) | (–0.8) | (–0.7) | |
| |$Fund\ Flow_{f,q}$| | 0.679*** | 0.656*** | 1.635*** | 1.715*** |
| (8.6) | (8.0) | (30.7) | (29.0) | |
| |$Fund\ Flow_{f,q-1} \times After$| | –0.027 | 0.004 | ||
| (–0.2) | (0.1) | |||
| |$Fund\ Flow_{f,q-1}$| | 0.020 | –0.270*** | ||
| (0.3) | (–5.8) | |||
| |$Fund\ Return_{f,q} \times After$| | –0.916 | –0.526 | 1.070*** | 1.359*** |
| (–1.0) | (–0.6) | (2.7) | (3.4) | |
| |$Fund\ Return_{f,q}$| | 0.592 | 0.304 | –0.675** | –0.740** |
| (0.8) | (0.4) | (–2.1) | (–2.3) | |
| |$Fund\ Return_{f,q-1} \times After$| | –0.909 | 0.619 | ||
| (–0.8) | (1.5) | |||
| |$Fund\ Return_{f,q-1}$| | 1.415* | 0.335 | ||
| (1.7) | (1.1) | |||
| Year-quarter fixed effects | Yes | Yes | Yes | Yes |
| # of Obs | 12,731 | 12,731 | 39,760 | 39,760 |
| Adj R2 | 0.046 | 0.046 | 0.091 | 0.093 |
| DepVar: . | NetBuy (US Treasuries)|$_{f,q}$| . | |||
|---|---|---|---|---|
| . | U.S. low-LMI funds . | Other funds . | ||
| . | (1) . | (2) . | (3) . | (4) . |
| |$Fund\ Flow_{f,q} \times After$| | 0.594*** | 0.613*** | –0.053 | –0.053 |
| (4.8) | (4.6) | (–0.8) | (–0.7) | |
| |$Fund\ Flow_{f,q}$| | 0.679*** | 0.656*** | 1.635*** | 1.715*** |
| (8.6) | (8.0) | (30.7) | (29.0) | |
| |$Fund\ Flow_{f,q-1} \times After$| | –0.027 | 0.004 | ||
| (–0.2) | (0.1) | |||
| |$Fund\ Flow_{f,q-1}$| | 0.020 | –0.270*** | ||
| (0.3) | (–5.8) | |||
| |$Fund\ Return_{f,q} \times After$| | –0.916 | –0.526 | 1.070*** | 1.359*** |
| (–1.0) | (–0.6) | (2.7) | (3.4) | |
| |$Fund\ Return_{f,q}$| | 0.592 | 0.304 | –0.675** | –0.740** |
| (0.8) | (0.4) | (–2.1) | (–2.3) | |
| |$Fund\ Return_{f,q-1} \times After$| | –0.909 | 0.619 | ||
| (–0.8) | (1.5) | |||
| |$Fund\ Return_{f,q-1}$| | 1.415* | 0.335 | ||
| (1.7) | (1.1) | |||
| Year-quarter fixed effects | Yes | Yes | Yes | Yes |
| # of Obs | 12,731 | 12,731 | 39,760 | 39,760 |
| Adj R2 | 0.046 | 0.046 | 0.091 | 0.093 |
This table reports the regression results of U.S. Treasury trading on fund flows for U.S. low-LMI funds and other funds around the introduction of the Liquidity Risk Management Rule. Bond funds are divided into U.S. and non-U.S. funds based on their domicile countries. We define funds with low liquidity management intensity as follows. First, for each fund, we compute its liquidity management intensity as the coefficient estimate from a univariate regression of NetBuy (US Treasuries) on Fund Flow using data from the past 12 quarters. We require at least five quarterly observations to estimate this coefficient. Second, we take the average of this intensity for each fund between 2012 to 2016 and rank all funds in the sample based on this average intensity. The bottom two-thirds of funds are identified as funds with low liquidity management intensity, while the other funds are identified as funds with high liquidity management intensity. NetBuy (US Treasuries) measures the percentage share change of a fund’s total holdings in U.S. Treasuries relative to its beginning of the quarter holdings. After is a dummy variable that equals one from 2017 onwards, and zero otherwise. Fund Flow is the quarterly fund flows. Fund Return is the quarterly fund return. All variables are winsorized by quarter at the 5th and 95th percentiles. We control for year-quarter fixed effects and standard errors are clustered by funds. t-statistics are reported in parentheses.
p < .1;
p < .05;
p < .01. The sample period is from 2012 through 2021, that is, 5 years before and after the introduction of the Liquidity Risk Management Rule.
Fund trading on U.S. Treasuries and fund flows: Liquidity Risk Management Rule
| DepVar: . | NetBuy (US Treasuries)|$_{f,q}$| . | |||
|---|---|---|---|---|
| . | U.S. low-LMI funds . | Other funds . | ||
| . | (1) . | (2) . | (3) . | (4) . |
| |$Fund\ Flow_{f,q} \times After$| | 0.594*** | 0.613*** | –0.053 | –0.053 |
| (4.8) | (4.6) | (–0.8) | (–0.7) | |
| |$Fund\ Flow_{f,q}$| | 0.679*** | 0.656*** | 1.635*** | 1.715*** |
| (8.6) | (8.0) | (30.7) | (29.0) | |
| |$Fund\ Flow_{f,q-1} \times After$| | –0.027 | 0.004 | ||
| (–0.2) | (0.1) | |||
| |$Fund\ Flow_{f,q-1}$| | 0.020 | –0.270*** | ||
| (0.3) | (–5.8) | |||
| |$Fund\ Return_{f,q} \times After$| | –0.916 | –0.526 | 1.070*** | 1.359*** |
| (–1.0) | (–0.6) | (2.7) | (3.4) | |
| |$Fund\ Return_{f,q}$| | 0.592 | 0.304 | –0.675** | –0.740** |
| (0.8) | (0.4) | (–2.1) | (–2.3) | |
| |$Fund\ Return_{f,q-1} \times After$| | –0.909 | 0.619 | ||
| (–0.8) | (1.5) | |||
| |$Fund\ Return_{f,q-1}$| | 1.415* | 0.335 | ||
| (1.7) | (1.1) | |||
| Year-quarter fixed effects | Yes | Yes | Yes | Yes |
| # of Obs | 12,731 | 12,731 | 39,760 | 39,760 |
| Adj R2 | 0.046 | 0.046 | 0.091 | 0.093 |
| DepVar: . | NetBuy (US Treasuries)|$_{f,q}$| . | |||
|---|---|---|---|---|
| . | U.S. low-LMI funds . | Other funds . | ||
| . | (1) . | (2) . | (3) . | (4) . |
| |$Fund\ Flow_{f,q} \times After$| | 0.594*** | 0.613*** | –0.053 | –0.053 |
| (4.8) | (4.6) | (–0.8) | (–0.7) | |
| |$Fund\ Flow_{f,q}$| | 0.679*** | 0.656*** | 1.635*** | 1.715*** |
| (8.6) | (8.0) | (30.7) | (29.0) | |
| |$Fund\ Flow_{f,q-1} \times After$| | –0.027 | 0.004 | ||
| (–0.2) | (0.1) | |||
| |$Fund\ Flow_{f,q-1}$| | 0.020 | –0.270*** | ||
| (0.3) | (–5.8) | |||
| |$Fund\ Return_{f,q} \times After$| | –0.916 | –0.526 | 1.070*** | 1.359*** |
| (–1.0) | (–0.6) | (2.7) | (3.4) | |
| |$Fund\ Return_{f,q}$| | 0.592 | 0.304 | –0.675** | –0.740** |
| (0.8) | (0.4) | (–2.1) | (–2.3) | |
| |$Fund\ Return_{f,q-1} \times After$| | –0.909 | 0.619 | ||
| (–0.8) | (1.5) | |||
| |$Fund\ Return_{f,q-1}$| | 1.415* | 0.335 | ||
| (1.7) | (1.1) | |||
| Year-quarter fixed effects | Yes | Yes | Yes | Yes |
| # of Obs | 12,731 | 12,731 | 39,760 | 39,760 |
| Adj R2 | 0.046 | 0.046 | 0.091 | 0.093 |
This table reports the regression results of U.S. Treasury trading on fund flows for U.S. low-LMI funds and other funds around the introduction of the Liquidity Risk Management Rule. Bond funds are divided into U.S. and non-U.S. funds based on their domicile countries. We define funds with low liquidity management intensity as follows. First, for each fund, we compute its liquidity management intensity as the coefficient estimate from a univariate regression of NetBuy (US Treasuries) on Fund Flow using data from the past 12 quarters. We require at least five quarterly observations to estimate this coefficient. Second, we take the average of this intensity for each fund between 2012 to 2016 and rank all funds in the sample based on this average intensity. The bottom two-thirds of funds are identified as funds with low liquidity management intensity, while the other funds are identified as funds with high liquidity management intensity. NetBuy (US Treasuries) measures the percentage share change of a fund’s total holdings in U.S. Treasuries relative to its beginning of the quarter holdings. After is a dummy variable that equals one from 2017 onwards, and zero otherwise. Fund Flow is the quarterly fund flows. Fund Return is the quarterly fund return. All variables are winsorized by quarter at the 5th and 95th percentiles. We control for year-quarter fixed effects and standard errors are clustered by funds. t-statistics are reported in parentheses.
p < .1;
p < .05;
p < .01. The sample period is from 2012 through 2021, that is, 5 years before and after the introduction of the Liquidity Risk Management Rule.
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