Institutional Investors and Long-Term Investment : Evidence from Chile

Developing countries are trying to develop long-term financial markets and institutional investors are expected to play a key role. This paper uses unique evidence on the universe of institutional investors from the leading case of Chile to study t...

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Main Authors: Opazo, Luis, Raddatz, Claudio, Schmukler, Sergio L.
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2014
Subjects:
BID
Online Access:http://documents.worldbank.org/curated/en/2014/06/19680163/institutional-investors-long-term-investment-evidence-chile
http://hdl.handle.net/10986/18756
id okr-10986-18756
recordtype oai_dc
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic AGENCY PROBLEMS
ASSET CLASS
ASSET CLASSES
ASSET HOLDINGS
ASSET MANAGERS
ASSET PRICES
ASSET VALUES
ASSET-LIABILITY MISMATCH
ASYMMETRIC INFORMATION
AUCTION
AUCTION AMOUNT
AUCTIONS
BANK DEPOSITS
BANK POLICY
BANKING SECTOR
BANKING SYSTEM
BID
BIDS
BOND
BOND AUCTIONS
BOND FUNDS
BOND INDEX
BOND INDICES
BOND MARKETS
BORROWER
CAPITAL MARKET
CAPITAL MARKET DEVELOPMENT
CAPITAL MARKETS
CAPITAL REQUIREMENT
CASH FLOWS
CENTRAL BANK
CONTRACTUAL SAVINGS
CONTRACTUAL SAVINGS INSTITUTIONS
CORPORATE BOND
CORPORATE BOND MARKET
CORPORATE BONDS
CORPORATE DEBT
CORPORATE INVESTMENT
DEBT
DEBT HOLDINGS
DEBT ISSUANCES
DEBT MATURITIES
DEBT MATURITY
DEBTORS
DEFAULT RISK
DERIVATIVES
DERIVATIVES MARKETS
DEVELOPING COUNTRIES
DISCLOSURE REQUIREMENTS
DOLLAR BONDS
DOMESTIC INSTITUTIONAL INVESTORS
DOMESTIC MARKET
EMERGING ECONOMIES
EMERGING MARKET
EMERGING MARKET DEBT
EMERGING MARKETS
EQUITIES
EQUITY HOLDING
EQUITY INSTRUMENTS
EXCHANGE RATES
FAIR VALUE
FEDERAL RESERVE
FEDERAL RESERVE BANK
FIDUCIARY RESPONSIBILITY
FINANCIAL CRISES
FINANCIAL CRISIS
FINANCIAL DEVELOPMENT
FINANCIAL FRAGILITY
FINANCIAL MARKET
FINANCIAL MARKETS
FINANCIAL STABILITY
FINANCIAL STUDIES
FINANCIAL SUPPORT
FINANCIAL SYSTEM
FIXED INCOME
FIXED INCOME INVESTMENT
FIXED INCOME MARKET
FOREIGN DIRECT INVESTMENT
FOREIGN INVESTMENT
FUND MANAGERS
GLOBAL DEVELOPMENT FINANCE
GOVERNMENT BOND
GOVERNMENT BONDS
GOVERNMENT DEBT
GOVERNMENT PAPER
HOLDINGS
HOLDINGS OF BANK
INDEXED BONDS
INFLATION
INFLATION RISK
INFLATION RISKS
INSTITUTIONAL INVESTOR
INSTITUTIONAL INVESTORS
INSURANCE
INSURANCE COMPANIES
INTEREST RATE
INTEREST RATE DERIVATIVES
INTERNATIONAL BANK
INTERNATIONAL DIVERSIFICATION
INTERNATIONAL ECONOMICS
INTERNATIONAL FINANCIAL MARKETS
INTERNATIONAL PORTFOLIO
INTERNATIONAL SETTLEMENTS
INVESTING
INVESTMENT BEHAVIOR
INVESTMENT HORIZON
INVESTMENT HORIZONS
INVESTMENT INSTRUMENTS
INVESTMENT OPPORTUNITIES
INVESTMENT PORTFOLIO
INVESTMENTS IN EQUITY
INVESTOR BASE
INVESTOR DEMAND
INVESTOR REDEMPTIONS
ISSUANCE
ISSUANCES
LEVEL OF CONFIDENCE
LIABILITY
LIFE INSURANCE
LIFE INSURANCE COMPANIES
LIFE INSURANCE COMPANY
LIQUID ASSETS
LIQUIDATIONS
LIQUIDITY
LIQUIDITY CRISES
LIQUIDITY RATIO
LOCAL CURRENCY
LONG-TERM ASSETS
LONG-TERM CAPITAL
LONG-TERM DEBT
LONG-TERM DEBT MARKET
LONG-TERM FINANCE
LONG-TERM INSTRUMENTS
LONG-TERM INVESTMENT
LONG-TERM INVESTMENTS
LONG-TERM INVESTORS
LONG-TERM LIABILITIES
LONG-TERM PAPER
MARK TO MARKET
MARK-TO-MARKET
MARK-TO-MARKET ACCOUNTING
MARKET CONDITIONS
MARKET LIQUIDITY
MARKET MECHANISM
MARKET PARTICIPANTS
MARKET PLAYERS
MARKET PRICES
MATURITIES
MATURITY
MATURITY DATE
MATURITY SPECTRUM
MATURITY STRUCTURE
MATURITY STRUCTURES
MONETARY POLICY
MONEY MARKET
MONEY MARKET INSTRUMENT
MORAL HAZARD
MORTGAGES
MUTUAL FUND
MUTUAL FUND INDUSTRY
MUTUAL FUND MANAGERS
MUTUAL FUNDS
OPEN-END FUNDS
OPPORTUNITY COST
OUTSTANDING DEBT
PENSION
PENSION FUND
PENSION FUNDS
PENSION REFORM
PENSION REFORMS
PENSION SYSTEM
PENSION SYSTEMS
PENSIONS
PORTFOLIO
PORTFOLIO CHOICE
PORTFOLIO HOLDINGS
PORTFOLIO INVESTMENTS
PORTFOLIO REGULATIONS
PORTFOLIOS
PRICE RISK
PRINCIPAL-AGENT PROBLEM
PRINCIPAL-AGENT PROBLEMS
PUBLIC FINANCE
PUBLIC SAVINGS
RATE OF RETURN
REGULATORY PRACTICES
RETAIL INVESTORS
RETIREMENT INCOME SECURITY
RETURN
RETURNS
RISK AVERSION
RISK EXPOSURE
RISK FACTORS
RISK PROFILE
RISK PROFILES
SECURITIES
SECURITIES MARKETS
SHORT MATURITIES
SHORT MATURITY
SHORT-TERM ASSET
SHORT-TERM ASSETS
SHORT-TERM BONDS
SHORT-TERM DEBT
SHORT-TERM INSTRUMENTS
SOVEREIGN BONDS
SOVEREIGN DEBT
STOCKS
TOTAL DEBT
TRADING
TRANCHE
TRANCHES
TRANSACTION
TRANSACTION COSTS
TRANSPARENCY
TREASURY
TURNOVER
TYPE OF INVESTOR
YIELD CURVE
spellingShingle AGENCY PROBLEMS
ASSET CLASS
ASSET CLASSES
ASSET HOLDINGS
ASSET MANAGERS
ASSET PRICES
ASSET VALUES
ASSET-LIABILITY MISMATCH
ASYMMETRIC INFORMATION
AUCTION
AUCTION AMOUNT
AUCTIONS
BANK DEPOSITS
BANK POLICY
BANKING SECTOR
BANKING SYSTEM
BID
BIDS
BOND
BOND AUCTIONS
BOND FUNDS
BOND INDEX
BOND INDICES
BOND MARKETS
BORROWER
CAPITAL MARKET
CAPITAL MARKET DEVELOPMENT
CAPITAL MARKETS
CAPITAL REQUIREMENT
CASH FLOWS
CENTRAL BANK
CONTRACTUAL SAVINGS
CONTRACTUAL SAVINGS INSTITUTIONS
CORPORATE BOND
CORPORATE BOND MARKET
CORPORATE BONDS
CORPORATE DEBT
CORPORATE INVESTMENT
DEBT
DEBT HOLDINGS
DEBT ISSUANCES
DEBT MATURITIES
DEBT MATURITY
DEBTORS
DEFAULT RISK
DERIVATIVES
DERIVATIVES MARKETS
DEVELOPING COUNTRIES
DISCLOSURE REQUIREMENTS
DOLLAR BONDS
DOMESTIC INSTITUTIONAL INVESTORS
DOMESTIC MARKET
EMERGING ECONOMIES
EMERGING MARKET
EMERGING MARKET DEBT
EMERGING MARKETS
EQUITIES
EQUITY HOLDING
EQUITY INSTRUMENTS
EXCHANGE RATES
FAIR VALUE
FEDERAL RESERVE
FEDERAL RESERVE BANK
FIDUCIARY RESPONSIBILITY
FINANCIAL CRISES
FINANCIAL CRISIS
FINANCIAL DEVELOPMENT
FINANCIAL FRAGILITY
FINANCIAL MARKET
FINANCIAL MARKETS
FINANCIAL STABILITY
FINANCIAL STUDIES
FINANCIAL SUPPORT
FINANCIAL SYSTEM
FIXED INCOME
FIXED INCOME INVESTMENT
FIXED INCOME MARKET
FOREIGN DIRECT INVESTMENT
FOREIGN INVESTMENT
FUND MANAGERS
GLOBAL DEVELOPMENT FINANCE
GOVERNMENT BOND
GOVERNMENT BONDS
GOVERNMENT DEBT
GOVERNMENT PAPER
HOLDINGS
HOLDINGS OF BANK
INDEXED BONDS
INFLATION
INFLATION RISK
INFLATION RISKS
INSTITUTIONAL INVESTOR
INSTITUTIONAL INVESTORS
INSURANCE
INSURANCE COMPANIES
INTEREST RATE
INTEREST RATE DERIVATIVES
INTERNATIONAL BANK
INTERNATIONAL DIVERSIFICATION
INTERNATIONAL ECONOMICS
INTERNATIONAL FINANCIAL MARKETS
INTERNATIONAL PORTFOLIO
INTERNATIONAL SETTLEMENTS
INVESTING
INVESTMENT BEHAVIOR
INVESTMENT HORIZON
INVESTMENT HORIZONS
INVESTMENT INSTRUMENTS
INVESTMENT OPPORTUNITIES
INVESTMENT PORTFOLIO
INVESTMENTS IN EQUITY
INVESTOR BASE
INVESTOR DEMAND
INVESTOR REDEMPTIONS
ISSUANCE
ISSUANCES
LEVEL OF CONFIDENCE
LIABILITY
LIFE INSURANCE
LIFE INSURANCE COMPANIES
LIFE INSURANCE COMPANY
LIQUID ASSETS
LIQUIDATIONS
LIQUIDITY
LIQUIDITY CRISES
LIQUIDITY RATIO
LOCAL CURRENCY
LONG-TERM ASSETS
LONG-TERM CAPITAL
LONG-TERM DEBT
LONG-TERM DEBT MARKET
LONG-TERM FINANCE
LONG-TERM INSTRUMENTS
LONG-TERM INVESTMENT
LONG-TERM INVESTMENTS
LONG-TERM INVESTORS
LONG-TERM LIABILITIES
LONG-TERM PAPER
MARK TO MARKET
MARK-TO-MARKET
MARK-TO-MARKET ACCOUNTING
MARKET CONDITIONS
MARKET LIQUIDITY
MARKET MECHANISM
MARKET PARTICIPANTS
MARKET PLAYERS
MARKET PRICES
MATURITIES
MATURITY
MATURITY DATE
MATURITY SPECTRUM
MATURITY STRUCTURE
MATURITY STRUCTURES
MONETARY POLICY
MONEY MARKET
MONEY MARKET INSTRUMENT
MORAL HAZARD
MORTGAGES
MUTUAL FUND
MUTUAL FUND INDUSTRY
MUTUAL FUND MANAGERS
MUTUAL FUNDS
OPEN-END FUNDS
OPPORTUNITY COST
OUTSTANDING DEBT
PENSION
PENSION FUND
PENSION FUNDS
PENSION REFORM
PENSION REFORMS
PENSION SYSTEM
PENSION SYSTEMS
PENSIONS
PORTFOLIO
PORTFOLIO CHOICE
PORTFOLIO HOLDINGS
PORTFOLIO INVESTMENTS
PORTFOLIO REGULATIONS
PORTFOLIOS
PRICE RISK
PRINCIPAL-AGENT PROBLEM
PRINCIPAL-AGENT PROBLEMS
PUBLIC FINANCE
PUBLIC SAVINGS
RATE OF RETURN
REGULATORY PRACTICES
RETAIL INVESTORS
RETIREMENT INCOME SECURITY
RETURN
RETURNS
RISK AVERSION
RISK EXPOSURE
RISK FACTORS
RISK PROFILE
RISK PROFILES
SECURITIES
SECURITIES MARKETS
SHORT MATURITIES
SHORT MATURITY
SHORT-TERM ASSET
SHORT-TERM ASSETS
SHORT-TERM BONDS
SHORT-TERM DEBT
SHORT-TERM INSTRUMENTS
SOVEREIGN BONDS
SOVEREIGN DEBT
STOCKS
TOTAL DEBT
TRADING
TRANCHE
TRANCHES
TRANSACTION
TRANSACTION COSTS
TRANSPARENCY
TREASURY
TURNOVER
TYPE OF INVESTOR
YIELD CURVE
Opazo, Luis
Raddatz, Claudio
Schmukler, Sergio L.
Institutional Investors and Long-Term Investment : Evidence from Chile
geographic_facet Latin America & Caribbean
Chile
relation Policy Research Working Paper;No. 6922
description Developing countries are trying to develop long-term financial markets and institutional investors are expected to play a key role. This paper uses unique evidence on the universe of institutional investors from the leading case of Chile to study to what extent mutual funds, pension funds, and insurance companies hold and bid for long-term instruments, and which factors affect their choices. The paper uses monthly asset-level portfolios to show that, despite the expectations, mutual and pension funds invest mostly in short-term assets relative to insurance companies. The significant difference across maturity structures is not driven by the supply side of debt or tactical behavior. Instead, it seems to be explained by manager incentives (related to short-run monitoring and the liability structure) that, combined with risk factors, tilt portfolios toward short-term instruments, even when long-term investing yields higher returns. Thus, the expansion of large institutional investors does not necessarily imply longer-term markets.
format Publications & Research :: Policy Research Working Paper
author Opazo, Luis
Raddatz, Claudio
Schmukler, Sergio L.
author_facet Opazo, Luis
Raddatz, Claudio
Schmukler, Sergio L.
author_sort Opazo, Luis
title Institutional Investors and Long-Term Investment : Evidence from Chile
title_short Institutional Investors and Long-Term Investment : Evidence from Chile
title_full Institutional Investors and Long-Term Investment : Evidence from Chile
title_fullStr Institutional Investors and Long-Term Investment : Evidence from Chile
title_full_unstemmed Institutional Investors and Long-Term Investment : Evidence from Chile
title_sort institutional investors and long-term investment : evidence from chile
publisher World Bank, Washington, DC
publishDate 2014
url http://documents.worldbank.org/curated/en/2014/06/19680163/institutional-investors-long-term-investment-evidence-chile
http://hdl.handle.net/10986/18756
_version_ 1764442752893845504
spelling okr-10986-187562021-04-23T14:03:49Z Institutional Investors and Long-Term Investment : Evidence from Chile Opazo, Luis Raddatz, Claudio Schmukler, Sergio L. AGENCY PROBLEMS ASSET CLASS ASSET CLASSES ASSET HOLDINGS ASSET MANAGERS ASSET PRICES ASSET VALUES ASSET-LIABILITY MISMATCH ASYMMETRIC INFORMATION AUCTION AUCTION AMOUNT AUCTIONS BANK DEPOSITS BANK POLICY BANKING SECTOR BANKING SYSTEM BID BIDS BOND BOND AUCTIONS BOND FUNDS BOND INDEX BOND INDICES BOND MARKETS BORROWER CAPITAL MARKET CAPITAL MARKET DEVELOPMENT CAPITAL MARKETS CAPITAL REQUIREMENT CASH FLOWS CENTRAL BANK CONTRACTUAL SAVINGS CONTRACTUAL SAVINGS INSTITUTIONS CORPORATE BOND CORPORATE BOND MARKET CORPORATE BONDS CORPORATE DEBT CORPORATE INVESTMENT DEBT DEBT HOLDINGS DEBT ISSUANCES DEBT MATURITIES DEBT MATURITY DEBTORS DEFAULT RISK DERIVATIVES DERIVATIVES MARKETS DEVELOPING COUNTRIES DISCLOSURE REQUIREMENTS DOLLAR BONDS DOMESTIC INSTITUTIONAL INVESTORS DOMESTIC MARKET EMERGING ECONOMIES EMERGING MARKET EMERGING MARKET DEBT EMERGING MARKETS EQUITIES EQUITY HOLDING EQUITY INSTRUMENTS EXCHANGE RATES FAIR VALUE FEDERAL RESERVE FEDERAL RESERVE BANK FIDUCIARY RESPONSIBILITY FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DEVELOPMENT FINANCIAL FRAGILITY FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL STABILITY FINANCIAL STUDIES FINANCIAL SUPPORT FINANCIAL SYSTEM FIXED INCOME FIXED INCOME INVESTMENT FIXED INCOME MARKET FOREIGN DIRECT INVESTMENT FOREIGN INVESTMENT FUND MANAGERS GLOBAL DEVELOPMENT FINANCE GOVERNMENT BOND GOVERNMENT BONDS GOVERNMENT DEBT GOVERNMENT PAPER HOLDINGS HOLDINGS OF BANK INDEXED BONDS INFLATION INFLATION RISK INFLATION RISKS INSTITUTIONAL INVESTOR INSTITUTIONAL INVESTORS INSURANCE INSURANCE COMPANIES INTEREST RATE INTEREST RATE DERIVATIVES INTERNATIONAL BANK INTERNATIONAL DIVERSIFICATION INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL MARKETS INTERNATIONAL PORTFOLIO INTERNATIONAL SETTLEMENTS INVESTING INVESTMENT BEHAVIOR INVESTMENT HORIZON INVESTMENT HORIZONS INVESTMENT INSTRUMENTS INVESTMENT OPPORTUNITIES INVESTMENT PORTFOLIO INVESTMENTS IN EQUITY INVESTOR BASE INVESTOR DEMAND INVESTOR REDEMPTIONS ISSUANCE ISSUANCES LEVEL OF CONFIDENCE LIABILITY LIFE INSURANCE LIFE INSURANCE COMPANIES LIFE INSURANCE COMPANY LIQUID ASSETS LIQUIDATIONS LIQUIDITY LIQUIDITY CRISES LIQUIDITY RATIO LOCAL CURRENCY LONG-TERM ASSETS LONG-TERM CAPITAL LONG-TERM DEBT LONG-TERM DEBT MARKET LONG-TERM FINANCE LONG-TERM INSTRUMENTS LONG-TERM INVESTMENT LONG-TERM INVESTMENTS LONG-TERM INVESTORS LONG-TERM LIABILITIES LONG-TERM PAPER MARK TO MARKET MARK-TO-MARKET MARK-TO-MARKET ACCOUNTING MARKET CONDITIONS MARKET LIQUIDITY MARKET MECHANISM MARKET PARTICIPANTS MARKET PLAYERS MARKET PRICES MATURITIES MATURITY MATURITY DATE MATURITY SPECTRUM MATURITY STRUCTURE MATURITY STRUCTURES MONETARY POLICY MONEY MARKET MONEY MARKET INSTRUMENT MORAL HAZARD MORTGAGES MUTUAL FUND MUTUAL FUND INDUSTRY MUTUAL FUND MANAGERS MUTUAL FUNDS OPEN-END FUNDS OPPORTUNITY COST OUTSTANDING DEBT PENSION PENSION FUND PENSION FUNDS PENSION REFORM PENSION REFORMS PENSION SYSTEM PENSION SYSTEMS PENSIONS PORTFOLIO PORTFOLIO CHOICE PORTFOLIO HOLDINGS PORTFOLIO INVESTMENTS PORTFOLIO REGULATIONS PORTFOLIOS PRICE RISK PRINCIPAL-AGENT PROBLEM PRINCIPAL-AGENT PROBLEMS PUBLIC FINANCE PUBLIC SAVINGS RATE OF RETURN REGULATORY PRACTICES RETAIL INVESTORS RETIREMENT INCOME SECURITY RETURN RETURNS RISK AVERSION RISK EXPOSURE RISK FACTORS RISK PROFILE RISK PROFILES SECURITIES SECURITIES MARKETS SHORT MATURITIES SHORT MATURITY SHORT-TERM ASSET SHORT-TERM ASSETS SHORT-TERM BONDS SHORT-TERM DEBT SHORT-TERM INSTRUMENTS SOVEREIGN BONDS SOVEREIGN DEBT STOCKS TOTAL DEBT TRADING TRANCHE TRANCHES TRANSACTION TRANSACTION COSTS TRANSPARENCY TREASURY TURNOVER TYPE OF INVESTOR YIELD CURVE Developing countries are trying to develop long-term financial markets and institutional investors are expected to play a key role. This paper uses unique evidence on the universe of institutional investors from the leading case of Chile to study to what extent mutual funds, pension funds, and insurance companies hold and bid for long-term instruments, and which factors affect their choices. The paper uses monthly asset-level portfolios to show that, despite the expectations, mutual and pension funds invest mostly in short-term assets relative to insurance companies. The significant difference across maturity structures is not driven by the supply side of debt or tactical behavior. Instead, it seems to be explained by manager incentives (related to short-run monitoring and the liability structure) that, combined with risk factors, tilt portfolios toward short-term instruments, even when long-term investing yields higher returns. Thus, the expansion of large institutional investors does not necessarily imply longer-term markets. 2014-06-25T20:25:31Z 2014-06-25T20:25:31Z 2014-06 http://documents.worldbank.org/curated/en/2014/06/19680163/institutional-investors-long-term-investment-evidence-chile http://hdl.handle.net/10986/18756 English en_US Policy Research Working Paper;No. 6922 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean Chile