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

Viviana Fernandez

doi:10.1016/j.jbusres.2013.11.010

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

Viviana Fernandez

Business School

Research output: Contribution to journal › Article › peer-review

7 Scopus citations

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.

Original language	English
Pages (from-to)	536-541
Number of pages	6
Journal	Journal of Business Research
Volume	67
Issue number	4
DOIs	https://doi.org/10.1016/j.jbusres.2013.11.010
State	Published - Apr 2014

Keywords

Dynamic panel
Granger causality
Pension fund administrator (PFA)
Stock return volatility

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10.1016/j.jbusres.2013.11.010

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title = "Stock volatility and pension funds under an individual capitalization-based system",

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.",

keywords = "Dynamic panel, Granger causality, Pension fund administrator (PFA), Stock return volatility",

author = "Viviana Fernandez",

note = "Funding Information: The author thanks the funding from FONDECYT Grant No. 1090005 , the JBR reviewers and guest editors, as well as the participants at the Southwestern Finance Association 2011 Annual Meeting (US), BALAS 2011 (Chile) and INFINITI Conference 2011 (Ireland). The author is also indebted to Pablo Casta{\~n}eda and Eduardo Fajnzylber for their valuable suggestions. ",

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doi = "10.1016/j.jbusres.2013.11.010",

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N2 - 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.

AB - 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.

KW - Dynamic panel

KW - Granger causality

KW - Pension fund administrator (PFA)

KW - Stock return volatility

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

Abstract

Keywords

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