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Herd Behaviour of Pension Funds by Asset Class
By Jacob Antoon Bikker & Ian Koetsier
This study investigates asset herd behaviour for Dutch pension funds from 1999 to 2014 using quarterly data. We find herd behaviour for investments in twenty asset classes including non-traditional asset classes, and to both purchasing and selling. Pension funds’ herd behaviour is particularly high in alternative investments, which might increase herding in general, as pension funds move their portfolio towards these assets in recent years. Herding intensity is higher during stock market crises, such as the Dot.com and the financial crisis, than during non-crisis conditions. However, during real estate or bond market crises, herding behaviour intensity remains virtually unchanged compared to non-crisis periods. The extent to which this behaviour has a stabilising or destabilising impact on financial markets varies per asset class. It is striking that sales of assets by pension funds on the equity and bond markets in times of crisis often have a stabilising impact, whereas this is not the case on the buying side.
Source @PaperSSRN
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