Pension funds and stock market volatility: An empirical analysis of OECD countries

Ashok Thomas, Luca Spataro and Nanditha Mathew

Journal of Financial Stability, 2014, vol. 11, issue C, 92-103

Abstract: The paper explores the empirical relationship between the share of pension funds assets invested in stocks and stock market volatility in OECD markets. For this purpose, by using panel data of 34 OECD countries from 2000 to 2010, we estimate both a random-effects panel model and a Prais–Winsten regression with panel-corrected standard errors and autoregressive errors. The estimations document that there is a significant negative relationship between the share of pension funds assets invested in stocks and stock market volatility in OECD markets. The binary probit and logit models further validate the argument that pension funds as institutional investors can dampen stock market volatility.

Keywords: Pension funds; Stock market volatility; Panel data (search for similar items in EconPapers)
JEL-codes: C23 G14 G23 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Working Paper: Pension funds and Stock Market Volatility: An Empirical Analysis of OECD countries (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:11:y:2014:i:c:p:92-103

DOI: 10.1016/j.jfs.2014.01.001

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