Business, Legal & Accounting Glossary
Flow of funds from riskier to safer investments in times of marketplace uncertainty or fear. For example, the flow could be from risky investments to safer investments within a given country, or from higher-risk countries to lower-risk countries.
Flight to quality refers to investors moving investments into low-risk securities during times of economic or political uncertainty. Flight to quality can be caused by anything from a war to a change of fiscal policy to a recession. A flight to quality may include moving investments into blue-chip stocks or out of low-rated bonds and into AA or AAA bonds. For many investors, a flight to quality means switching investments into Treasury Bonds back by the U.S. government. In today’s global economic environment a flight to quality often means transferring funds from a risky country to a safer country. A flight to quality often results in a decrease in the yield of government securities because of the sudden increase in demand. A flight to quality often results in a relative increase in the yield of riskier investments.
You should try to make sure that you are doing your best to ensure flight to quality for your overall portfolio.
Because the DOW kept dropping, Emanuel felt the flight to quality as his internet startup lost many investors to more established companies.
When fear was gripping the markets in the financial panic, there was a flight to quality when many investors moved their money out of corporate stocks and bonds and into the safety of U.S. treasury bills.
capital flight
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This glossary post was last updated: 1st November, 2021 | 0 Views.