Sparse portfolios and benchmarking in corporate bond markets
26 May 2026
12:15 -13:30
Times are shown in local time
Open to: All
Room W2.01 (Cambridge Judge Business School)
Trumpington St
Cambridge
CB2 1AG
United Kingdom
Join our Finance seminar
Speaker: Professor Anna Pavlova, London Business School
About the seminar topic
We use detailed data on fixed-income benchmark indexes in Canada and the United States to provide systematic evidence of how benchmarking shapes corporate bond ownership and prices. Funds hold sparse portfolios, and index weights strongly influence which bonds active and passive funds select. We rationalise these patterns in a model with benchmarked managers who face portfolio management costs, which predicts which assets managers optimally include in their portfolios. In the model, a bond’s price increases with its benchmarking intensity (BMI) – a measure of the amount of fund capital benchmarked against the bond – while portfolio sparsity attenuates this price impact for excluded bonds. Exploiting discontinuities in benchmarked assets around bond maturity cutoffs, we show that increases in bonds’ BMIs lead to reductions in yield spreads and increases in fund ownership – but only for bonds predicted to enter sparse portfolios.
Speaker bio
Anna Pavlova is Professor of Finance at London Business School (LBS). She is also an Editor of the Review of Financial Studies and the Programme Director of the Asset Pricing Programme at the Centre for Economic Policy Research (CEPR). She serves on the SFI Scientific Council. Formerly, she was a Director of the American Finance Association and a Director of the European Finance Association. Prior to joining LBS, she was on the faculty at MIT Sloan School of Management. She holds a PhD in Economics from the University of Pennsylvania, an MA in Economics from the New Economic School (Moscow) and an MSc in Applied Mathematics from Moscow State University. She has published in top journals such as American Economic Review, Journal of Finance, Journal of Financial Economics, Review of Financial Studies and Review of Economic Studies.
Her recent research focuses on the impact of institutional investors on asset prices, retail trading in options, the financialisaton of commodities and frictions in international financial markets. Her work has been cited in a large number of international newspapers, including Bloomberg, The Economist, The Financial Times and The Wall Street Journal. Anna has been awarded an ERC Starting Grant and has received a number of other prestigious awards for her research and teaching.
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No registration required. If you have any questions about this seminar, please email Bet Brooke.