Pension funds, large capital inflows and stock returns in a thin market

Janusz Brzeszczyński, Martin T. Bohl, Dobromił Serwa

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)
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Using unique data about capital flows from the public social security institute ZUS (Zakład Ubezpieczeń Społecznych) to private pension funds OFEs (Otwarte Fundusze Emerytalne) in Poland, we find that their impact, as a group of large institutional investors, on stock returns is statistically significant in short-term but no such effect exists in the long-run. This result is consistent with the temporary price pressure hypothesis of Ben-Rephael et al. (2011). We analyze the capital transfers, in the form of the aggregated pension contributions collected from all employees in the entire Polish economy, from the ZUS to the private pension funds, which further invest this capital on the stock market. The average time for the subsequent reaction of stock prices is found to be 4 days. The trading strategy based on this result generates superior outcomes in comparison with the passive strategy, which further confirms the price impact of capital inflows. Our findings are not only relevant for stock market investors but they also have broader policy implications for stock market regulators and for the national pension regulators.
Original languageEnglish
Pages (from-to)347-387
Number of pages41
JournalJournal of Pension Economics and Finance
Issue number3
Early online date5 Mar 2018
Publication statusE-pub ahead of print - 5 Mar 2018


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