Pension Funds’ Herding

40 Pages Posted: 2 Mar 2016

See all articles by Dirk Broeders

Dirk Broeders

De Nederlandsche Bank; Maastricht University

Damiaan Chen

University of Amsterdam

Peter Minderhoud

De Nederlandsche Bank

Willem Schudel

De Nederlandsche Bank

Date Written: March 1, 2016

Abstract

This paper uses unique and detailed transaction data to analyse herding behavior among pension funds. We distinguish between weak, semi strong and strong herding behaviour. Weak herding occurs if pension funds have similar rebalancing strategies. Semi strong herding arises when pension funds react similarly to other external shocks, such as changes in regulation and exceptional monetary policy operations. Finally, strong herding means that pension funds intentionally replicate changes in the strategic asset allocation of other pension funds. Without an economic reason. We find empirical evidence supporting all three types of herding behaviour in the asset allocation of large Dutch pension funds.

Keywords: Occupational Pension Funds, Asset Allocation, Herding; Financial Stability

JEL Classification: G11, G23

Suggested Citation

Broeders, Dirk and Chen, Damiaan and Minderhoud, Peter and Schudel, Willem, Pension Funds’ Herding (March 1, 2016). De Nederlandsche Bank Working Paper No. 503. Available at SSRN: https://ssrn.com/abstract=2741011 or http://dx.doi.org/10.2139/ssrn.2741011

Dirk Broeders (Contact Author)

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

HOME PAGE: http://www.dnb.nl

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

HOME PAGE: http://https://www.maastrichtuniversity.nl/about-um/faculties/school-business-and-economics

Damiaan Chen

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Peter Minderhoud

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Willem Schudel

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

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