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Pension Funds And Capital Market Development: How Much Bang For The Buck?

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  • Claudio Raddatz
  • Sergio Schmukler

    ()
    (Studies Division, Chilean Pension Supervisor)

Abstract

This paper studies the relation between institutional investors and capital market development by analyzing unique data on monthly asset-level portfolio allocations of Chilean pension funds between 1995 and 2005. The results depict pension funds as large and important institutional investors that tend to hold a large amount of bank deposits, government paper, and short-term assets; buy and hold assets in their portfolios without actively trading them; hold similar portfolios at the asset-class level; simultaneously buy and sell similar assets; and follow momentum strategies when trading. Although pension funds may have contributed to the development of certain primary markets, these patterns do not seem fully consistent with the initial expectations that pension funds would be a dynamic force driving the overall development of capital markets. The results do not appear to be explained by regulatory restrictions. Instead, asset illiquidity and manger incentives might be behind the patterns illustrated in this paper..

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File URL: http://www.spensiones.cl/redirect/files/doctrab/DT00038.pdf
File Function: Revised version, 2010
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Bibliographic Info

Paper provided by Superintendencia de Pensiones in its series Working Papers with number 38.

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Date of creation: Feb 2010
Date of revision: Feb 2010
Handle: RePEc:sdp:sdpwps:38

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Web page: http://www.spensiones.cl/
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Keywords: institutional investors; investment behavior; trading; turnover; momentum.;

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Citations

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Cited by:
  1. Claudio Raddatz & Sergio Schmukler, 2013. "Deconstructing Herding: Evidence from Pension Fund Investment Behavior," Journal of Financial Services Research, Springer, vol. 43(1), pages 99-126, February.
  2. Luis Opazo & Claudio Raddatz & Sergio Schmukler, 2009. "The Long And The Short Of Emerging Market Debt," Working Papers Central Bank of Chile 530, Central Bank of Chile.
  3. Gregorio Impavido & Esperanza Lasagabaster & Manuel Garcia-Huitron, 2010. "New Policies for Mandatory Defined Contribution Pensions : Industrial Organization Models and Investment Products," World Bank Publications, The World Bank, number 2462, August.
  4. Milos Laura Raisa, 2012. "Spillover Effects Of Pension Funds On Capital Markets. The Eu-15 Countries Case," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 164-170, December.

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