Download this Paper Open PDF in Browser

The Market for Lemmings: The Herding Behavior of Pension Funds

63 Pages Posted: 21 Feb 2015 Last revised: 6 Dec 2016

David P. Blake

City University London - Cass Business School - The Pensions Institute

Lucio Sarno

City University London - Sir John Cass Business School; Centre for Economic Policy Research (CEPR)

Gabriele Zinna

Bank of Italy

Date Written: December 6, 2016

Abstract

Using a unique dataset that covers UK defined-benefit pension fund asset allocations over the past 25 years, we study the investment behavior of pensions funds. The results suggest that pension funds display strong herding behavior, and tend to herd in subgroups, moving in and out of different asset classes following funds of similar size and sponsor type. Moreover, they systemically switch from equities to bonds as their liabilities mature, and mechanically rebalance their portfolios in the short term.

Keywords: Institutional investors; pension funds; herding; portfolio rebalancing.

JEL Classification: G23

Suggested Citation

Blake, David P. and Sarno, Lucio and Zinna, Gabriele, The Market for Lemmings: The Herding Behavior of Pension Funds (December 6, 2016). Available at SSRN: https://ssrn.com/abstract=2567381 or http://dx.doi.org/10.2139/ssrn.2567381

David P. Blake

City University London - Cass Business School - The Pensions Institute ( email )

London, EC2Y 8HB
Great Britain
+44 (0) 20-7040-5143 (Phone)
+44 (0) 20-7040-8881 (Fax)

Lucio Sarno

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Gabriele Zinna (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

HOME PAGE: http://gabrielezinna.github.io/

Paper statistics

Downloads
454
Rank
51,338
Abstract Views
3,184