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Is Locking Domestic Funds into the Local Market Beneficial? Evidence from the Polish Pension Reforms

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Author Info
Anna Zalewska ()
Abstract

This paper is concerned with the effect of enforced home bias on the development of emerging stock markets. It provides a detailed study of the impact on the Warsaw Stock Exchange of the Polish pension fund reforms and the associated restrictions on international investment. The time path of market development for the Warsaw Stock Exchange is compared with a benchmark sample consisting of the other seven post-communist countries that joined the EU in May 2004. It is shown that benefits arising from the pension funds’ increased investment in the home market are short-lived. In the long run, the relative performance of the Polish market returned to pre-1999 levels or worse, suggesting that enforced home bias on emerging markets may be detrimental, rather than beneficial, to the long-run development of the market.

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Publisher Info
Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 06/153.

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Length: 21 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:bri:cmpowp:06/153

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Related research
Keywords: pension reforms; home bias; stock market development; transition countries;

Find related papers by JEL classification:
G23 - Financial Economics - - Financial Institutions and Services - - - Pension Funds; Other Private Financial Institutions
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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    Other versions:
  3. Karen K. Lewis, 1999. "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 571-608, June. [Downloadable!] (restricted)
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    Other versions:
  10. Michael Frenkel & Lukas Menkhoff, 2004. "Are Foreign Institutional Investors Good for Emerging Markets?," The World Economy, Blackwell Publishing, vol. 27(8), pages 1275-1293, 08. [Downloadable!] (restricted)
    Other versions:
  11. Impavido, Gregorio & Musalem, Alberto R. & Tressel, Thierry, 2003. "The impact of contractual savings institutions on securities markets," Policy Research Working Paper Series 2948, The World Bank. [Downloadable!]
  12. Grout, Paul A. & Zalewska, Anna, 2006. "The impact of regulation on market risk," Journal of Financial Economics, Elsevier, vol. 80(1), pages 149-184, April. [Downloadable!] (restricted)
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