PT  - JOURNAL ARTICLE
AU  - Brent W. Ambrose
AU  - Kelly N. Cai
AU  - Jean Helwege
TI  - Fallen Angels and Price Pressure
AID  - 10.3905/jfi.2012.21.3.074
DP  - 2011 Dec 31
TA  - The Journal of Fixed Income
PG  - 74--86
VI  - 21
IP  - 3
4099  - https://pm-research.com/content/21/3/74.short
4100  - https://pm-research.com/content/21/3/74.full
AB  - We examine price pressure in a setting where trades occur because of regulations and when information effects are absent. Our study of fallen angel bond sales by insurance-companies shows that price pressure is negligible, if not nonexistent. We attribute our results to the fact that trades occur when fundamentals are unchanged and dealers know that the sales are not motivated by private information about future returns. Our results confirm the prediction of several theoretical models that sellers will benefit from a higher price when they are able to separate themselves out to dealers as uninformed. Consistent with following a strategy of sunshine trading (as in Admati and Pfleiderer [1991]), we find that insurers do not attempt to hide their trades by selling bonds before they are downgraded.TOPICS: Fixed-income portfolio management, passive strategies, exchanges/markets/clearinghouses