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Pension funds and Stock Market Volatility: An Empirical Analysis of OECD countries

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  • Ashok Thomas
  • Luca Spataro
  • Nanditha Mathew

Abstract

The paper explores the empirical relationship between the share of pension fund s’assets invested in stocks and stock market volatility in OECD markets. For this purpose, by using panel data of 34 OECD countries from 2000 to 2010, we estimate both a random effects panel model and a Prais-Winsten regression with panel corrected standard errors and autoregressive errors. The econometric estimation documents that there is a significant negative relationship between the share of pension funds assets invested in stocks and stock market volatility in OECD markets. The binary Probit and Logit models further validate the argument that pension funds as institutional investors can dampen stock market volatility.

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Paper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2013/162.

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Date of creation: 01 Apr 2013
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Handle: RePEc:pie:dsedps:2013/162

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Keywords: Pension funds; Stock market volatility; Panel data.;

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Cited by:
  1. Ashok Thomas & Luca Spataro, 2013. "Pension funds and Market Efficiency: A review," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2013/164, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  2. Senderski, Marcin, 2014. "Assessing the strictness of portfolio-related regulation of pension funds: Rethinking the definition of prudent," MPRA Paper 56610, University Library of Munich, Germany.

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