Home bias and Dutch pension funds' investment behavior

Using a panel data set of more than 600 Dutch pension funds (PFs) between 1992 and 2006, we investigate asset allocation behavior of Dutch PFs across multiple asset classes. We find that domestic investments, also known as home bias, in portfolio choices of Dutch institutional investors have fallen....

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Bibliographic Details
Published in:The European journal of finance 2014-11, Vol.20 (11), p.978-993
Main Authors: Rubbaniy, G., van Lelyveld, I. P.P., Verschoor, W. F.C.
Format: Article
Language:English
Subjects:
Asset allocation
Bias
Determinants
home bias
Income
Institutional investments
Institutional investors
Investment decision
Investment policy
Netherlands
Pension funds
portfolio choice
Portfolio diversification
Portfolio selection
Studies
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Summary:Using a panel data set of more than 600 Dutch pension funds (PFs) between 1992 and 2006, we investigate asset allocation behavior of Dutch PFs across multiple asset classes. We find that domestic investments, also known as home bias, in portfolio choices of Dutch institutional investors have fallen. We also find that the introduction of the euro, the dot-com crisis (1999-2001) and individual PF's characteristics are significant determinants of home bias. Overall, mature PFs' portfolios are diversified internationally, whereas large PFs seem to prefer to only scale up their foreign, less-risky positions at the expense of domestic fixed-income positions. The effect of the dot-com crisis is more pronounced for domestic bonds, whereas the introduction of the euro was more important for domestic equities.
ISSN:1351-847X
1466-4364
DOI:10.1080/1351847X.2013.784206