Home Bias and Dutch Pension Funds’ Investment Behaviour

27 Pages Posted: 22 Aug 2010 Last revised: 6 Oct 2011

See all articles by Iman van Lelyveld

Iman van Lelyveld

De Nederlandsche Bank; Vrije Universiteit Amsterdam

Willem F. C. Verschoor

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Ghulame Rubbaniy

Zayed University - College of Business

Date Written: August 20, 2010

Abstract

This study presents the empirical evidence on the evolution of home bias in Dutch pension funds (PFs) asset allocation behaviour. Using a panel data of more than 600 Dutch PFs over the period 1992-2006, we observe a significantly diminishing home bias from 37% to 13% in portfolio choice decisions of Dutch institutional investors. This abridge in home bias is significantly swayed by their individual characteristics, the introduction of the euro and dot-com crisis (2000-2001). Overall international portfolio diversification is conspicuous in mature PFs; whereas, large PFs seem preferring only to scale up their foreign less-risky positions at the expense of domestic fixed incomes. The effect of the dot-com financial turmoil is more pronounced on domestic bonds while introduction of the euro influences more to the domestic equities. We find liability structure driving more-risky positions across the markets in lower-sized Dutch PFs.

Keywords: Pension funds, Portfolio choice, Home bias

JEL Classification: G11, G23

Suggested Citation

van Lelyveld, Iman and Verschoor, Willem F. C. and Rubbaniy, Ghulame, Home Bias and Dutch Pension Funds’ Investment Behaviour (August 20, 2010). 23rd Australasian Finance and Banking Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1662564 or http://dx.doi.org/10.2139/ssrn.1662564

Iman van Lelyveld

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Vrije Universiteit Amsterdam ( email )

Netherlands

Willem F. C. Verschoor

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Ghulame Rubbaniy (Contact Author)

Zayed University - College of Business ( email )

Zayed University
P.O. Box 144534
Abu Dhabi
United Arab Emirates

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