IDEAS home Printed from https://ideas.repec.org/p/bri/cmpowp/05-136.html

Home bias and stock market development. The Polish experience

Author

Listed:
  • Anna Zalewska

Abstract

Pension reform has become a major policy issue for both developed and developing countries in recent years. In developing countries the impact of these reforms on the development of their financial markets is critical. However, the initial expectations that pension reforms in developing countries would bring broad benefits and result in faster market development have not materialised. A particular problem has been that governments have imposed restrictions on the freedom of pension funds’ investment decisions. In particular, they have a tendency to enforce home bias in investment behaviour. This paper provides a non-technical introduction to home bias and its role in stock market development, and uses the Polish experience as a case study. It discusses the main arguments for portfolio diversification, the primary side effects that emerge from locking funds into underdeveloped equity markets, and highlights the problems the Polish pension funds face as a result of the “enforced” home bias policy of the Polish authorities. The findings support the view that enforced home bias has a negative impact on the local stock market development, on the performance of pension reform.

Suggested Citation

  • Anna Zalewska, 2005. "Home bias and stock market development. The Polish experience," The Centre for Market and Public Organisation 05/136, The Centre for Market and Public Organisation, University of Bristol, UK.
    • Handle: RePEc:bri:cmpowp:05/136
    as

    Download full text from publisher

    File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp136.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Indermit S. Gill & Truman G. Packard & Juan Yermo, 2005. "Keeping the Promise of Social Security in Latin America," IDB Publications (Books), Inter-American Development Bank, number 59998, February.
    2. Gill, Indermit S. & Packard, Truman G. & Yermo, Juan, 2005. "Keeping the Promise of Social Security in Latin America," IDB Publications (Books), Inter-American Development Bank, number 346, June.
    3. Jay R. Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing, and Allocations," Journal of Finance, American Finance Association, vol. 57(4), pages 1795-1828, August.
    4. Tim Loughran & Jay R. Ritter, 2002. "Why Don't Issuers Get Upset About Leaving Money on the Table in IPOs?," The Review of Financial Studies, Society for Financial Studies, vol. 15(2), pages 413-444, March.
    5. Vittas, Dimitri, 2000. "Pension reform and capital market development -"feasibility"and"impact"preconditions," Policy Research Working Paper Series 2414, The World Bank.
    6. Indermit S. Gill & Truman Packard & Juan Yermo, 2005. "Keeping the Promise of Social Security in Latin America," World Bank Publications - Books, The World Bank Group, number 7391, April.
    7. Campbell, John Y. & Viceira, Luis M., 2002. "Strategic Asset Allocation: Portfolio Choice for Long-Term Investors," OUP Catalogue, Oxford University Press, number 9780198296942.
    8. Canner, Niko & Mankiw, N Gregory & Weil, David N, 1997. "An Asset Allocation Puzzle," American Economic Review, American Economic Association, vol. 87(1), pages 181-191, March.
    9. James, Estelle, 1996. "Protecting the old and promoting growth : a defense of averting the old age crisis," Policy Research Working Paper Series 1570, The World Bank.
    10. Loughran, Tim & Ritter, Jay R., 2000. "Uniformly least powerful tests of market efficiency," Journal of Financial Economics, Elsevier, vol. 55(3), pages 361-389, March.
    11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    12. repec:idb:brikps:59998 is not listed on IDEAS
    13. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 25(2), pages 65-86.
    14. Loughran, Tim & Ritter, Jay R, 1995. "The New Issues Puzzle," Journal of Finance, American Finance Association, vol. 50(1), pages 23-51, March.
    15. Exley, C.J. & Mehta, S.J.B. & Smith, A.D., 1997. "The Financial Theory of Defined Benefit Pension Schemes," British Actuarial Journal, Cambridge University Press, vol. 3(4), pages 835-966, October.
    16. Zvi Bodie, 2001. "Financial Engineering and Social Security Reform," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 291-320, National Bureau of Economic Research, Inc.
    17. Queisser, Monika & Vittas, Dimitri, 2000. "The Swiss multi-pillar pension system : triumph of common sense?," Policy Research Working Paper Series 2416, The World Bank.
    18. Thomas E. MaCurdy & John B. Shoven, 2001. "Asset Allocation and Risk Allocation: Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities?," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 11-40, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Killins, Robert N., 2019. "An investigation of the short-term performance of the Canadian IPO market," Research in International Business and Finance, Elsevier, vol. 47(C), pages 102-113.
    2. Gao, Yan, 2010. "What comprises IPO initial returns: Evidence from the Chinese market," Pacific-Basin Finance Journal, Elsevier, vol. 18(1), pages 77-89, January.
    3. Saade, Samer, 2015. "Investor sentiment and the underperformance of technology firms initial public offerings," Research in International Business and Finance, Elsevier, vol. 34(C), pages 205-232.
    4. Augusto de la Torre & Sergio L. Schmukler, 2007. "Emerging Capital Markets and Globalization : The Latin American Experience," World Bank Publications - Books, The World Bank Group, number 7187, April.
    5. Adriana Kugler & Maurice Kugler, 2009. "Labor Market Effects of Payroll Taxes in Developing Countries: Evidence from Colombia," Economic Development and Cultural Change, University of Chicago Press, vol. 57(2), pages 335-358, January.
    6. Calvo, Esteban & Williamson, John B., 2006. "Old-Age Pension Reform and Modernization Pathways: Lessons for China from Latin America," MPRA Paper 4872, University Library of Munich, Germany, revised 2007.
    7. Börsch-Supan, Axel & Ludwig, Alexander & Sommer, Mathias, 2005. "Aging and asset prices," Papers 07-29, Sonderforschungsbreich 504.
    8. Su Chan & Jiajin Chen & Ko Wang, 2013. "Are REIT IPOs Unique? The Global Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 47(4), pages 719-759, November.
    9. Su, Chen & Bangassa, Kenbata, 2011. "The impact of underwriter reputation on initial returns and long-run performance of Chinese IPOs," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(5), pages 760-791.
    10. Zheng, Steven X., 2007. "Are IPOs really overpriced?," Journal of Empirical Finance, Elsevier, vol. 14(3), pages 287-309, June.
    11. Zhang Hanbing & Jeffrey E. Jarrett & Xia Pan, 2021. "The Post-IPO Performance in the PRC," International Journal of Business and Management, Canadian Center of Science and Education, vol. 14(11), pages 109-109, July.
    12. Otchere, Isaac & Owusu-Antwi, George & Mohsni, Sana, 2013. "Why are stock exchange IPOs so underpriced and yet outperform in the long run?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 76-98.
    13. Trauten, Andreas & Schulz, Roland C., 2006. "IPO investment strategies and pseudo market timing," Working Papers 36, University of Münster, Competence Center Internet Economy and Hybrid Systems, European Research Center for Information Systems (ERCIS).
    14. Alexander Ljungqvist & Vikram Nanda & Rajdeep Singh, 2006. "Hot Markets, Investor Sentiment, and IPO Pricing," The Journal of Business, University of Chicago Press, vol. 79(4), pages 1667-1702, July.
    15. João Batista Amorim Toniato, 2007. "“Hot Issue” IPO Markets and its Consequences for Issuing Firms and Investors: The UK Market of 2000," Brazilian Business Review, Fucape Business School, vol. 4(1), pages 1-26, January.
    16. Domonkos F. Vamossy, 2023. "Social Media Emotions and IPO Returns," Papers 2306.12602, arXiv.org, revised Apr 2024.
    17. Vakrman, Tomas & Kristoufek, Ladislav, 2015. "Underpricing, underperformance and overreaction in initial pubic offerings: Evidence from investor attention using online searches," FinMaP-Working Papers 35, Collaborative EU Project FinMaP - Financial Distortions and Macroeconomic Performance: Expectations, Constraints and Interaction of Agents.
    18. Glenn W. Boyle & Graeme A. Guthrie, 2005. "Human Capital and Popular Investment Advice," Review of Finance, European Finance Association, vol. 9(2), pages 139-164.
    19. Sarra Ben Slama Zouari & Abdelkader Boudriga & Neila Boulila Taktak, 2011. "Determinants Of Ipo Underpricing: Evidence From Tunisia," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 5(1), pages 13-32.
    20. Jean Helwege & J. Nellie Liang, 2003. "Initial public offerings in hot and cold markets," Finance and Economics Discussion Series 2003-04, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bri:cmpowp:05/136. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cmbriuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.