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Short-termism of long-term investors? The investment behaviour of Dutch insurance companies and pension funds

Patty Duijm () and Sophie Steins Bisschop

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: Countercyclical long-term investment strategies of insurance companies and pension funds (ICPFs) can support the stability of the financial system. Yet there is limited understanding of how ICPFs invest during market shocks, such as the global financial crisis and the European sovereign debt crisis. The intention of this paper is to fill that lacuna by investigating Dutch ICPFs' equity and sovereign bond portfolios. A first analysis shows that while ICs massively sold equities during the crisis, PFs kept buying equities as markets tumbled. Results from our regression analysis over a longer time horizon suggest procyclical behaviour by ICs, while for PFs we do not find evidence for procyclical or countercyclical investment behaviour. Moreover, both ICs and PFs sold their affected sovereign bonds prior to a rating downgrade. This could be considered as destabilising at a macro-level, as it may accelerate the deteriorating financing conditions of the affected countries.

Keywords: microprudential; macroprudential; investment behaviour; pension funds; insurance companies; procyclicality; Solvency II; global financial crisis (search for similar items in EconPapers)
JEL-codes: E44 G01 G11 G22 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-ias and nep-mac
Date: 2015-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

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Journal Article: Short-termism of long-term investors? The investment behaviour of Dutch insurance companies and pension funds (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:489

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