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The market for lemmings: The herding behavior of pension funds

Sarno, L., Blake, D. and Zinna, G. (2017). The market for lemmings: The herding behavior of pension funds. Journal of Financial Markets, doi: 10.1016/j.finmar.2017.03.001

Abstract

Using a unique dataset that covers UK defined-benefit pension fund asset allocations over the past 25 years, we provide 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.

Publication Type: Article
Publisher Keywords: Institutional investors; pension funds; herding; portfolio rebalancing
Subjects: H Social Sciences > HG Finance
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/17035
[img] Text - Accepted Version
This document is not freely accessible until 21 September 2018 due to copyright restrictions.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

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