Issue Information

• DOI: http://doi.org/10.1002/jcaf.22375
• Published date: 01 January 2020
• Date: 01 January 2020

VOLUME 31, NUMBER 1 •January 2020

Editorial

7The passive investment bubble

Damir Tokic

Since the 2008 financial crisis, investors have significantly increased their allocation to

passive investment vehicles, such as the exchange traded funds. At the same time, the active

investment funds experienced significant outflows as their performance underperformed the

major indices. As the result of these capital flows, the market participation balance

potentially changed, which increased the possibility of a market bubble—which some

already define as the passive investment bubble.

Blind Peer Reviews

12 Long‐term interest rates under negative interest rate policy: Analysis of Japanese

government bond and swap markets

Takayasu Ito

Market segmentation is observed in the Japanese government bond (JGB) and swap markets

of 2‐,3‐,4‐,5‐,7‐, and 10‐year maturities under negative interest rate policy regime. This

also means that the arbitrage between the JGB and swap markets does not work in these

maturities. After the Bank of Japan introduces a yield curve control policy under negative

interest rate policy, market segmentation is observed only in the JGB and swap markets of 7‐

and 10‐year maturities. In the maturities of 2, 3, 4, and 5 years, the JGB yield and the swap

rate co‐move. The market function recovers and arbitrage works between the JGB and swap

markets in these maturities.