@article{e8f9e624d99e482d8e8db1bb5f05ce3d,
title = "Quantitative easing and agency MBS investment and financing choices by mortgage REITs",
abstract = "We study Agency Mortgage Real Estate Investment Trusts (Agency MREITs)—shadow banks that invest in guaranteed U.S. Agency mortgage-backed securities (MBS) and that are principally funded with repo debt—to test how quantitative easing (QE) affects financial risk taking. Agency MREIT asset growth is inversely related to the Federal Reserve's Agency mortgage-backed securities (MBS) purchases, reflecting investor portfolio rebalancing. Agency MREITs increased leverage during QE, consistent with “reaching for yield.” They countered the heightened solvency risk by extending repo maturity and increased hedging of funding costs to reduce liquidity and interest rate risk. Research linking QE to increased credit risk taking should account for contemporaneous changes in financing choices and risk management.",
author = "Frame, {W. Scott} and Eva Steiner",
note = "Funding Information: This paper has benefitted from comments by Jose Berrospide, Yongheng Deng, Robert DeYoung, Stuart Gabriel, Richard Green, Jacob Sagi, Aurel Hizmo, Arito Ono, Rodney Ramcharan, Philip Swagel, Joe Tracy, Emily Williams, John Worth, Abdullah Yavas (Editor), two anonymous referees, and seminar participants at the Federal Reserve Board, Homer Hoyt Institute, LSU, 2018 Midwest Finance Association Meeting, 2018 ASSA Annual Meeting, 2018 Northern Finance Association Meeting, 2017 AREUEA National Conference, and the 2017 “Unconventional Monetary Policy: Lessons Learned” conference held at the Hong Kong Monetary Authority. We thank Abhijeet Bhalkikar, Manny Dong, and Pam Frisbee for outstanding research assistance; and Ellen Correia Golay and Brett Rose for providing the Federal Reserve data on purchases and holdings of U.S. Treasuries and Agency MBS. The views expressed do not necessarily reflect those of the Federal Reserve Bank of Dallas or any other entities within the Federal Reserve System. Publisher Copyright: {\textcopyright} 2021 American Real Estate and Urban Economics Association.",
year = "2022",
month = dec,
day = "1",
doi = "10.1111/1540-6229.12355",
language = "English (US)",
volume = "50",
pages = "931--965",
journal = "Real Estate Economics",
issn = "1080-8620",
publisher = "Wiley-Blackwell",
number = "4",
}