Is Locking Domestic Funds into the Local Market Beneficial? Evidence from the Polish Pension Reforms
AbstractThis 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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Bibliographic InfoPaper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 06/153.
Length: 21 pages
Date of creation: Jul 2006
Date of revision:
pension reforms; home bias; stock market development; transition countries;
Find related papers by JEL classification:
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-30 (All new papers)
- NEP-FIN-2006-09-30 (Finance)
- NEP-FMK-2006-09-30 (Financial Markets)
- NEP-TRA-2006-09-30 (Transition Economics)
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