Working paper 06/153

Is Locking Domestic Funds into the Local Market Beneficial? Evidence from the Polish Pension Reforms (PDF, file 237 KB) (PDF, 236kB)

Anna Zalewska

This paper is concerned with the effect of enforced home bias on the development of emerging stock markets. It provides a detailed study of the impact on the Warsaw Stock Exchange of the Polish pension fund reforms and the associated restrictions on international investment. The time path of market development for the Warsaw Stock Exchange is compared with a benchmark sample consisting of the other seven post-communist countries that joined the EU in May 2004. It is shown that benefits arising from the pension funds’ increased investment in the home market are short-lived. In the long run, the relative performance of the Polish market returned to pre-1999 levels or worse, suggesting that enforced home bias on emerging markets may be detrimental, rather than beneficial, to the long-run development of the market.

Note: some of the documents on this page are in PDF format. In order to view a PDF you will need Adobe Acrobat Reader