Bond Fund Performance and Flows During the COVID-19 Crisis Pubblico

Abstract

We investigate the performance and flows of bond mutual funds during the COVID-19 Crisis period with a focus on their relationship with different measures of sustainability. Through the analysis of factor-adjusted returns, we find that bond mutual funds underperformed the market during the crisis period but outperformed both before and after the crisis. We also document that bond mutual funds with higher ESG ratings generated higher crisis-period returns compared to their lower-rated counterparts. Moreover, bond mutual funds with investment exclusions attracted more money before the COVID-19 crisis and performed better during the crisis. These results suggest that sustainable bond mutual funds are more resilient to large negative shocks. Furthermore, investors were able to exploit this advantage and invested in these sustainable funds as a hedging strategy before the crisis struck.

Table of Contents

1 Introduction 1

2 Data and Methodology 6

2.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2.1.1 Mutual Fund Returns . . . . . . . . . . . . . . . . . . . . . . . . . . 8

2.1.2 Mutual Funds Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

2.2 Mutual Fund Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2.2.1 Dierent Measures of Returns . . . . . . . . . . . . . . . . . . . . . . 9

2.2.2 Fund Return vs Sustainability: Regression Analysis . . . . . . . . . . 10

2.3 Mutual Fund Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

2.3.1 Dierent Measures of Fund Flows . . . . . . . . . . . . . . . . . . . . 11

2.3.2 Fund Flow vs Sustainability: Regression Analysis . . . . . . . . . . . 11

3 Results 12

3.1 Mutual Fund Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

3.1.1 Dierent Measures of Returns . . . . . . . . . . . . . . . . . . . . . . 12

3.1.2 Fund Return vs Sustainability: Regression Analysis . . . . . . . . . . 15

3.2 Mutual Fund Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3.2.1 Dierent Measures of Fund Flows . . . . . . . . . . . . . . . . . . . . 18

3.2.2 Fund Flow vs Sustainability: Regression Analysis . . . . . . . . . . . 20

4 Conclusion 22

5 Figures and Graphs 24

Figure 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Figure 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Figure 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Figure 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Figure 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Figure 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Figure 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Figure 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Figure 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Figure 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Table 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Table 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Table 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Table 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Table 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Table 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Table 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Table 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Table 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

About this Honors Thesis

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School	Emory College
Department	Mathematics and Economics
Degree	B.A.
Submission	Honors Thesis
Language	English
Research Field	Economics, Finance Economics, Environmental Economics, General
Parola chiave	Mutual Funds ESG
Committee Chair / Thesis Advisor	Kim, Jeong-Ho, Emory University
Committee Members	Rueda Robayo, Miguel, Emory University Ettinger, Bree , Emory University

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