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The Impact of Pension Funds on Financial Markets

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Abstract

This paper empirically explores the impact of pension funds on market volatility, equity prices, government and corporate bond yields for a panel of 24 countries. The results show a positive and statistically significant relationship between market volatility and pension assets. It complements micro evidence (Dennis and Strickland, 2002) as well as macro findings (Davis, 2004). In addition, equity prices are found to be positively correlated with pension funds, a finding observable for both OECD countries and emerging market economies (EMEs) and present in both the short and long terms. Furthermore, there is evidence indicating a negative link between pension fund assets and both corporate and government bond yields. This might be due to the sizeable buying effects of pension funds, particularly when governments have the tendency to use pension funds to finance implicit pension debts when the traditional pay-as-you-go systems shift to funded systems.

Suggested Citation

  • Oecd, 2006. "The Impact of Pension Funds on Financial Markets," Financial Market Trends, OECD Publishing, vol. 2006(2), pages 145-167.
  • Handle: RePEc:oec:dafkab:5l9gd5nbrz7d
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    File URL: http://dx.doi.org/10.1787/fmt-v2006-art13-en
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    1. repec:eee:jocaae:v:13:y:2017:i:3:p:322-337 is not listed on IDEAS
    2. Hu, Yuwei, 2012. "Growth of Asian Pension Assets: Implications for Financial and Capital Markets," ADBI Working Papers 360, Asian Development Bank Institute.
    3. De Lucia, Caterina & Bartlett, Mark, 2014. "Implementing a biofuel economy in the EU: Lessons from the SUSTOIL project and future perspectives for next generation biofuels," Renewable and Sustainable Energy Reviews, Elsevier, vol. 29(C), pages 22-30.
    4. Thomas, Ashok & Spataro, Luca & Mathew, Nanditha, 2014. "Pension funds and stock market volatility: An empirical analysis of OECD countries," Journal of Financial Stability, Elsevier, vol. 11(C), pages 92-103.
    5. Guerci, E. & Kirman, A. & Moulet, S., 2014. "Learning to bid in sequential Dutch auctions," Journal of Economic Dynamics and Control, Elsevier, vol. 48(C), pages 374-393.

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