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   Investment Thoughts - Academia

The Market for Lemmings: The Herding Behavior of Pension Funds

 

Abstract

 

Using a unique dataset that covers United Kingdom defined-benefit pension fund asset allocations over the past 25 years, we present robust evidence that pension funds display strong herding behavior, and tend to herd in subgroups defined by fund size and sponsor type. We also show that, while pension funds tend to switch from equities to bonds as their liabilities mature, they mechanically rebalance their portfolios in the short term. Finally, we find that their price impact is neither persistent nor stabilizing, and that there are only small cross-sectional differences in returns across pension funds, consistent with their widespread herding behavior.

 


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The Market for Lemmings: The Herding Behavior of Pension Funds

 

Professor David Blake
Director
Pensions Institute
Cass Business School
106 Bunhill Row
London EC1Y 8TZ
United Kingdom


d.blake@city.ac.uk
www.pensions-institute.org

Journal of Financial Markets, November 2017-David Blake, Lucio Sarno, and Gabriele Zinna

30.04.2019


 

Themes

 

Asia

Bonds

Bubbles and Crashes

Business Cycles
Central Banks

China

Commodities
Contrarian

Corporates

Creative Destruction
Credit Crunch

Currencies

Current Account

Deflation
Depression 

Equity
Europe
Financial Crisis
Fiscal Policy

Germany

Gloom and Doom
Gold

Government Debt

Historical Patterns

Household Debt
Inflation

Interest Rates

Japan

Market Timing

Misperceptions

Monetary Policy
Oil
Panics
Permabears
PIIGS
Predictions

Productivity
Real Estate

Seasonality

Sovereign Bonds
Systemic Risk

Switzerland

Tail Risk

Technology

Tipping Point
Trade Balance

U.S.A.
Uncertainty

Valuations

Yield