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Introduction to Financial Econometrics and Statistics Read chapter Read first chapter

2015 | OriginalPaper | Chapter

66. Pension Funds: Financial Econometrics on the Herding Phenomenon in Spain and the United Kingdom

Authors : Mercedes Alda García, Luis Ferruz

Published in: Handbook of Financial Econometrics and Statistics

Publisher: Springer New York

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Abstract

This work reflects the impact of the Spanish and UK pension funds investment on the market efficiency; specifically, we analyze if manager’s behavior enhances the existence of herding phenomena.
To implement this study, we apply a less common methodology: the estimated cross-sectional standard deviations of betas. We also estimate the betas with an econometric technique less applied in the financial literature: state-space models and the Kalman filter. Additionally, in order to obtain a robust estimation, we apply the Huber estimator.
Finally, we apply several models and study the existence of herding towards the market, size, book-to-market, and momentum factors.
The results are similar for the two countries and style factors, revealing the existence of herding. Nonetheless, this is smaller on size, book-to-market, and momentum factors.

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previous chapter Accurate Formulas for Evaluating Barrier Options with Dividends Payout and the Application in Credit Risk Valuation
next chapter Estimating the Correlation of Asset Returns: A Quantile Dependence Perspective
Appendix
Available only for authorised users
Footnotes
1
It should be clear that the linear factor model used does not require that the market is in equilibrium or efficient.
 
2
For its calculation we apply the difference between the monthly return obtained by the corresponding MSCI gross and the MSCI price; then we obtain the total of the 12 previous values for a determined month. Information obtained from MSCI: http://​www.​msci.​com/​
 
3
Data obtained from the Bank of Spain: www.​bde.​es
 
4
These tables are available upon request.
 
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Metadata
Title
Pension Funds: Financial Econometrics on the Herding Phenomenon in Spain and the United Kingdom
Authors
Mercedes Alda García
Luis Ferruz
Copyright Year
2015
Publisher
Springer New York
Book
Handbook of Financial Econometrics and Statistics

Print ISBN: 978-1-4614-7749-5

Electronic ISBN: 978-1-4614-7750-1

Copyright Year: 2015

DOI
https://doi.org/10.1007/978-1-4614-7750-1_66