Home Bias and Dutch Pension Funds’ Investment Behaviour
27 Pages Posted: 22 Aug 2010 Last revised: 2 Dec 2020
Date Written: August 20, 2010
Abstract
This study presents the empirical evidence on the evolution of home bias in Dutch pension funds (PFs) asset allocation behaviour. Using a panel data of more than 600 Dutch PFs over the period 1992-2006, we observe a significantly diminishing home bias from 37% to 13% in portfolio choice decisions of Dutch institutional investors. This abridge in home bias is significantly swayed by their individual characteristics, the introduction of the euro and dot-com crisis (2000-2001). Overall international portfolio diversification is conspicuous in mature PFs; whereas, large PFs seem preferring only to scale up their foreign less-risky positions at the expense of domestic fixed incomes. The effect of the dot-com financial turmoil is more pronounced on domestic bonds while introduction of the euro influences more to the domestic equities. We find liability structure driving more-risky positions across the markets in lower-sized Dutch PFs.
Keywords: Pension funds, Portfolio choice, Home bias
JEL Classification: G11, G23
Suggested Citation: Suggested Citation
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