Pension funds and capital markets

Abstract

The importance of whether pension funds have beneficiary effects on capital markets or not, is highlighted as the answer will decide whether they should be implemented or expanded to developing European and former communist countries. In order to test this suggestion, this thesis expands the above-mentioned study to OECD countries. Pension funds have been implemented years ago in the UK and in some other European countries (e.g. The Netherlands). However it is only at recent years and due to the implementation of pension funds in developing countries that thoughts of their possible benefits for the capital market are expressed. This has happened because although pension funds existed before their implementation in less developed countries, their role was limited due to strict regulations. The main question of the thesis is whether pension fund investment in the domestic equity market has a negative relationship with equity market volatility.