QCGBF Virtual Seminar Series: Chiara Scotti: Interconnectedness in the Corporate Bond Market

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About the Event

The Qatar Centre for Global Banking & Finance welcomes Chiara Scotti from the Federal Reserve Board (FRB) to present this virtual seminar on ‘Interconnectedness in the Corporate Bond Market'.

Paper Abstract

In this paper, we develop an alternative and complementary network structure, the investor similarity network, which mirrors the traditional notion of the portfolio similarity network. Leveraging on the richness of the eMAXX database, and matching its quarterly holding from to the security-level data on corporate bond trading volume, liquidity, and volatility derived from TRACE, we analyze the role of interconnectedness in the corporate bond market. We find that, on average, corporate bonds that are held across fewer (several) portfolios are those that require a higher (lower) compensation for risk and that are less (more) liquid. This relationship is stronger when a financial asset is under stress, i.e. when the spread and illiquidity of an asset are in the upper tail of their conditional distributions, suggesting that higher interconnectedness is beneficial in situations of market stress.

About the Speaker

Chiara Scotti joined the Board of Governors of the Federal Reserve System in 2005 and is currently a deputy associate director in the Financial Stability Division at the Board. From 2020 to 2022 she served as Special Advisers to Vice Chair Clarida. She spent the 2017 fall semester at Bocconi University as visiting professor.

Her expertise spans deliberation and evaluation of conventional and unconventional monetary policy; assessment of financial stability risks, with particular emphasis on asset managers, interconnectedness of the financial system, and digital assets; monitoring of domestic and international financial markets; and LIBOR transition.

Her research explores a variety of topics in applied macroeconomics and finance, including real-time data and measurement of business conditions, macroeconomic surprises, and uncertainty as well as unconventional monetary policy and financial stability. Her real-time index of US business conditions—the Aruoba-Diebold-Scotti (ADS) index—and surprise and uncertainty indexes are widely used in academic papers and industry analyses. She has published in a variety of refereed journals such as the Journal of Monetary Economics, Journal of Business and Economic Statistics, Journal of Econometrics, and Journal of Money, Credit and Banking.

Dr. Scotti holds a B.A. in economics (summa cum laude) from Bocconi University and M.A. and Ph.D. degrees in economics from the University of Pennsylvania. Before obtaining her Ph.D., she worked as an analyst for Credit Suisse in London and as a Ph.D. intern for the European Central Bank in Frankfurt.