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

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-Winste...

Full description

Saved in:
Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Thomas, Ashok, Spataro, Luca, Nanditha Mathew
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2013
Subjects
Pension funds
Securities markets
Stock exchanges
Volatility
Online AccessGet full text

Cover

More Information
Summary: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.