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Stock volatility and pension funds under an individual capitalization-based system

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  • Fernandez, Viviana

Abstract

The existence of feedback effects between volatility and institutional investor holdings has been extensively studied for the United States. This article contributes to the literature by investigating this issue for Pension Fund Administrators (PFAs) in Chile. To this end, data on PFAs' holdings is gathered for 42 firms actively traded on the Santiago Stock Exchange during December 2002–July 2008. The main findings of this study are the following. First, an increase in PFAs' stock holdings translates into a mild effect on stock return volatility. Second, an increase in stock return volatility leads to a moderate decrease in PFAs' stock holdings, suggesting PFAs' preference for safer stocks. The key policy implication of these conclusions is that PFAs' stock trading does not have a destabilizing impact on the domestic stock market.

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  • Fernandez, Viviana, 2014. "Stock volatility and pension funds under an individual capitalization-based system," Journal of Business Research, Elsevier, vol. 67(4), pages 536-541.
    • Handle: RePEc:eee:jbrese:v:67:y:2014:i:4:p:536-541
    DOI: 10.1016/j.jbusres.2013.11.010
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    Cited by:

    1. Vo, Xuan Vinh & Phan, Dang Bao Anh, 2019. "Herd behavior and idiosyncratic volatility in a frontier market," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 321-330.
    2. Cristian Escudero & José L. Ruiz, 2021. "Life insurance companies’ investment abroad and the internal rate of return on Chilean annuities," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(4), pages 688-709, October.
    3. Huang, Teng-Ching & Lin, Bing-Huei & Yang, Tung-Hsiao, 2015. "Herd behavior and idiosyncratic volatility," Journal of Business Research, Elsevier, vol. 68(4), pages 763-770.
    4. Jara, Mauricio & López-Iturriaga, Félix & San Martín, Pablo & Saona, Paolo & Tenderini, Giannina, 2019. "Chilean pension fund managers and corporate governance: The impact on corporate debt," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 321-337.

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