Pension Funds and Capital Market Development

94 Pages Posted: 20 Apr 2016

See all articles by Claudio E. Raddatz

Claudio E. Raddatz

Central Bank of Chile; World Bank

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Date Written: December 1, 2008

Abstract

This paper studies the relation between institutional investors and capital market development by analyzing unique data on monthly asset-level portfolio allocations of Chilean pension funds between 1995 and 2005. The results depict pension funds as large and important institutional investors that tend to hold a large amount of bank deposits, government paper, and short-term assets; buy and hold assets in their portfolios without actively trading them; hold similar portfolios at the asset-class level; simultaneously buy and sell similar assets; and follow momentum strategies when trading. Although pension funds may have contributed to the development of certain primary markets, these patterns do not seem fully consistent with the initial expectations that pension funds would be a dynamic force driving the overall development of capital markets. The results do not appear to be explained by regulatory restrictions. Instead, asset illiquidity and manger incentives might be behind the patterns illustrated in this paper.

Keywords: Investment and Investment Climate, Social Funds and Pensions, Capital Markets and Capital Flows

Suggested Citation

Raddatz, Claudio E. and Schmukler, Sergio, Pension Funds and Capital Market Development (December 1, 2008). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2008. Available at SSRN: https://ssrn.com/abstract=1312270

Claudio E. Raddatz (Contact Author)

Central Bank of Chile ( email )

United States

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Sergio Schmukler

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN MC 3-301
Washington, DC 20433
United States
202-458-4167 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/en/about/people/s/sergio-schmukler

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