Institutional Traders' Behavior in an Emerging Stock Market: Empirical Evidence on Polish Pension Fund Investors

Abstract

In this paper, we contribute to the literature on institutional herding and positive feedback trading by analysing the investment behavior of pension funds on the Polish stock market. Since pension funds in Poland operate under more stringent investment regulation than their counterparts in mature markets, we aim to gain additional insight into the behavior of this type of institutional investors acting in an emerging capital market. Our results show that Polish pension fund investors are to a greater extent involved in herd-like behavior and more often pursue feedback trading strategies than their mature peers. This finding is primarily attributed to regulatory inefficiencies and high market concentration. We do not detect, however, that trading by the pension funds exerts significant influence on stock prices.

Keywords: Pension funds, Herding, Feedback trading, Polish stock market

JEL Classification: G20, G23