Contractual Savings, Stock, and Asset Markets

The authors study the relationship between the development of insurance, and contractual savings, (the assets and portfolio composition of pension funds, and life and non-life insurance companies) and the development of stock markets (market capita...

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Main Authors: Impavido, Gregorio, Musalem, Alberto R.
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2014
Subjects:
GDP
Online Access:http://documents.worldbank.org/curated/en/2000/11/748749/contractual-savings-stock-asset-markets
http://hdl.handle.net/10986/19779
id okr-10986-19779
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 AGENTS
ANNUITY
ARBITRAGE
ASSETS
AUDITING
BALANCE SHEETS
BANK DEPOSITS
BANK PORTFOLIOS
BANKING SECTOR
BANKING SYSTEM
BANKING SYSTEMS
BANKRUPTCY
BANKS
BENEFICIARIES
BOND MARKETS
BONDS
BORROWING
CAPITAL MARKET REGULATION
CAPITAL MARKETS
CAPITALIZATION
CARTEL
COMMISSIONS
CONTINGENT LIABILITIES
CONTRACTUAL SAVINGS
CONTRACTUAL SAVINGS INSTITUTIONS
CORPORATE CONTROL
CORPORATE GOVERNANCE
CREDIT RISK
CREDIT RISKS
DEBT
DEFINED BENEFIT PENSION PLANS
DISASTERS
ECONOMIC GROWTH
EMERGING MARKETS
ENDOGENOUS VARIABLES
EQUILIBRIUM
EQUITY MARKETS
EXPECTED RETURN
FINANCIAL ASSETS
FINANCIAL CRISIS
FINANCIAL INNOVATION
FINANCIAL INTERMEDIARIES
FINANCIAL INTERMEDIATION
FINANCIAL MARKETS
FINANCIAL SECTOR
FINANCIAL STRUCTURE
FINANCIAL STRUCTURES
FREE ENTRY
GDP
GROWTH RATE
INDEMNITY
INFLATION
INFORMATION DISCLOSURE
INSURANCE
INSURANCE BENEFITS
INSURANCE COMPANIES
INTEREST RATES
INVESTMENT BANKS
LIFE INSURANCE
LIFE INSURANCE COMPANIES
LIQUID ASSETS
LIQUIDITY
LONG TERM LIABILITIES
MACROECONOMICS
MARKET EQUILIBRIUM
MARKET VALUE
MITIGATION
MORAL HAZARDS
MUTUAL FUNDS
NON- LIFE INSURANCE
NON-LIFE INSURANCE
PENALTIES
PENSION FUNDS
PENSION PLANS
PENSION SYSTEMS
PER CAPITA INCOME
PORTFOLIO
PORTFOLIOS
POSITIVE EFFECTS
PROVIDENT FUNDS
PUBLIC DEBT
RATING AGENCIES
REAL INTEREST RATE
REAL SECTOR
REGULATORY FRAMEWORK
RESERVES
RETIREMENT
RISK DIVERSIFICATION
RISK MANAGEMENT
RISK PREMIUM
SAVINGS
SAVINGS
SAVINGS INCREASES
SAVINGS INSTRUMENTS
SAVINGS SCHEMES
SECURITIES
SECURITIES MARKETS
SETTLEMENT SYSTEMS
SOLVENCY
STOCK EXCHANGES
STOCK MARKETS
TAKEOVER
TERM FINANCE
TRANSACTION COSTS
TRANSPARENCY
UNEMPLOYMENT
VENTURE CAPITAL
WEALTH
spellingShingle AGENTS
ANNUITY
ARBITRAGE
ASSETS
AUDITING
BALANCE SHEETS
BANK DEPOSITS
BANK PORTFOLIOS
BANKING SECTOR
BANKING SYSTEM
BANKING SYSTEMS
BANKRUPTCY
BANKS
BENEFICIARIES
BOND MARKETS
BONDS
BORROWING
CAPITAL MARKET REGULATION
CAPITAL MARKETS
CAPITALIZATION
CARTEL
COMMISSIONS
CONTINGENT LIABILITIES
CONTRACTUAL SAVINGS
CONTRACTUAL SAVINGS INSTITUTIONS
CORPORATE CONTROL
CORPORATE GOVERNANCE
CREDIT RISK
CREDIT RISKS
DEBT
DEFINED BENEFIT PENSION PLANS
DISASTERS
ECONOMIC GROWTH
EMERGING MARKETS
ENDOGENOUS VARIABLES
EQUILIBRIUM
EQUITY MARKETS
EXPECTED RETURN
FINANCIAL ASSETS
FINANCIAL CRISIS
FINANCIAL INNOVATION
FINANCIAL INTERMEDIARIES
FINANCIAL INTERMEDIATION
FINANCIAL MARKETS
FINANCIAL SECTOR
FINANCIAL STRUCTURE
FINANCIAL STRUCTURES
FREE ENTRY
GDP
GROWTH RATE
INDEMNITY
INFLATION
INFORMATION DISCLOSURE
INSURANCE
INSURANCE BENEFITS
INSURANCE COMPANIES
INTEREST RATES
INVESTMENT BANKS
LIFE INSURANCE
LIFE INSURANCE COMPANIES
LIQUID ASSETS
LIQUIDITY
LONG TERM LIABILITIES
MACROECONOMICS
MARKET EQUILIBRIUM
MARKET VALUE
MITIGATION
MORAL HAZARDS
MUTUAL FUNDS
NON- LIFE INSURANCE
NON-LIFE INSURANCE
PENALTIES
PENSION FUNDS
PENSION PLANS
PENSION SYSTEMS
PER CAPITA INCOME
PORTFOLIO
PORTFOLIOS
POSITIVE EFFECTS
PROVIDENT FUNDS
PUBLIC DEBT
RATING AGENCIES
REAL INTEREST RATE
REAL SECTOR
REGULATORY FRAMEWORK
RESERVES
RETIREMENT
RISK DIVERSIFICATION
RISK MANAGEMENT
RISK PREMIUM
SAVINGS
SAVINGS
SAVINGS INCREASES
SAVINGS INSTRUMENTS
SAVINGS SCHEMES
SECURITIES
SECURITIES MARKETS
SETTLEMENT SYSTEMS
SOLVENCY
STOCK EXCHANGES
STOCK MARKETS
TAKEOVER
TERM FINANCE
TRANSACTION COSTS
TRANSPARENCY
UNEMPLOYMENT
VENTURE CAPITAL
WEALTH
Impavido, Gregorio
Musalem, Alberto R.
Contractual Savings, Stock, and Asset Markets
relation Policy Research Working Paper;No. 2490
description The authors study the relationship between the development of insurance, and contractual savings, (the assets and portfolio composition of pension funds, and life and non-life insurance companies) and the development of stock markets (market capitalization and value traded). Their contribution lies in providing cross-country, and time-series on a hypothesis that is very popular - but had not been substantiated - among supporters of funded pension systems, and insurance in which reserves are largely invested in tradable securities (equities and bonds). The authors present a three-assets model (money, quasi money, and shares) to study the effects of the development of contractual savings (pension funds and life insurance companies) and non-life insurance companies on assets market equilibrium, and on stock market development. They use an unbalanced panel of 21 OECD, and 5 developing countries, and an error components two-stage least squares (EC2SLS) estimator, including a test for endogeneity of these institutional investors. The results support the hypothesis that contractual savings, and non-life insurance companies can be treated as exogenous to the development of stock markets; that contractual savings and non-life insurance companies, as well as their portfolio policies, promote stock market development as measured by stock market capitalization, and value traded as a share of GDP. The results show that stock market capitalization is positively correlated with the return on stocks, the assets of contractual savings and non-life insurance companies, the shares of stocks in the portfolios of contractual savings and non-life insurance companies, and the value traded stocks. Stock market capitalization is negatively correlated with the real interest rate, the real return on money (measured by the inverse of inflation), and stock market volatility. Stock market value traded is positively correlated with the shares of stocks in the portfolios of contractual savings and non-life insurance companies, and the real return on money. It is negatively correlated with the real interest rate. The authors conclude that insurance and contractual savings are powerful instruments for developing stock markets, providing depth and liquidity. Higher liquidity, in turn, further promotes market capitalization.
format Publications & Research :: Policy Research Working Paper
author Impavido, Gregorio
Musalem, Alberto R.
author_facet Impavido, Gregorio
Musalem, Alberto R.
author_sort Impavido, Gregorio
title Contractual Savings, Stock, and Asset Markets
title_short Contractual Savings, Stock, and Asset Markets
title_full Contractual Savings, Stock, and Asset Markets
title_fullStr Contractual Savings, Stock, and Asset Markets
title_full_unstemmed Contractual Savings, Stock, and Asset Markets
title_sort contractual savings, stock, and asset markets
publisher World Bank, Washington, DC
publishDate 2014
url http://documents.worldbank.org/curated/en/2000/11/748749/contractual-savings-stock-asset-markets
http://hdl.handle.net/10986/19779
_version_ 1764440626196119552
spelling okr-10986-197792021-04-23T14:03:44Z Contractual Savings, Stock, and Asset Markets Impavido, Gregorio Musalem, Alberto R. AGENTS ANNUITY ARBITRAGE ASSETS AUDITING BALANCE SHEETS BANK DEPOSITS BANK PORTFOLIOS BANKING SECTOR BANKING SYSTEM BANKING SYSTEMS BANKRUPTCY BANKS BENEFICIARIES BOND MARKETS BONDS BORROWING CAPITAL MARKET REGULATION CAPITAL MARKETS CAPITALIZATION CARTEL COMMISSIONS CONTINGENT LIABILITIES CONTRACTUAL SAVINGS CONTRACTUAL SAVINGS INSTITUTIONS CORPORATE CONTROL CORPORATE GOVERNANCE CREDIT RISK CREDIT RISKS DEBT DEFINED BENEFIT PENSION PLANS DISASTERS ECONOMIC GROWTH EMERGING MARKETS ENDOGENOUS VARIABLES EQUILIBRIUM EQUITY MARKETS EXPECTED RETURN FINANCIAL ASSETS FINANCIAL CRISIS FINANCIAL INNOVATION FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL STRUCTURE FINANCIAL STRUCTURES FREE ENTRY GDP GROWTH RATE INDEMNITY INFLATION INFORMATION DISCLOSURE INSURANCE INSURANCE BENEFITS INSURANCE COMPANIES INTEREST RATES INVESTMENT BANKS LIFE INSURANCE LIFE INSURANCE COMPANIES LIQUID ASSETS LIQUIDITY LONG TERM LIABILITIES MACROECONOMICS MARKET EQUILIBRIUM MARKET VALUE MITIGATION MORAL HAZARDS MUTUAL FUNDS NON- LIFE INSURANCE NON-LIFE INSURANCE PENALTIES PENSION FUNDS PENSION PLANS PENSION SYSTEMS PER CAPITA INCOME PORTFOLIO PORTFOLIOS POSITIVE EFFECTS PROVIDENT FUNDS PUBLIC DEBT RATING AGENCIES REAL INTEREST RATE REAL SECTOR REGULATORY FRAMEWORK RESERVES RETIREMENT RISK DIVERSIFICATION RISK MANAGEMENT RISK PREMIUM SAVINGS SAVINGS SAVINGS INCREASES SAVINGS INSTRUMENTS SAVINGS SCHEMES SECURITIES SECURITIES MARKETS SETTLEMENT SYSTEMS SOLVENCY STOCK EXCHANGES STOCK MARKETS TAKEOVER TERM FINANCE TRANSACTION COSTS TRANSPARENCY UNEMPLOYMENT VENTURE CAPITAL WEALTH The authors study the relationship between the development of insurance, and contractual savings, (the assets and portfolio composition of pension funds, and life and non-life insurance companies) and the development of stock markets (market capitalization and value traded). Their contribution lies in providing cross-country, and time-series on a hypothesis that is very popular - but had not been substantiated - among supporters of funded pension systems, and insurance in which reserves are largely invested in tradable securities (equities and bonds). The authors present a three-assets model (money, quasi money, and shares) to study the effects of the development of contractual savings (pension funds and life insurance companies) and non-life insurance companies on assets market equilibrium, and on stock market development. They use an unbalanced panel of 21 OECD, and 5 developing countries, and an error components two-stage least squares (EC2SLS) estimator, including a test for endogeneity of these institutional investors. The results support the hypothesis that contractual savings, and non-life insurance companies can be treated as exogenous to the development of stock markets; that contractual savings and non-life insurance companies, as well as their portfolio policies, promote stock market development as measured by stock market capitalization, and value traded as a share of GDP. The results show that stock market capitalization is positively correlated with the return on stocks, the assets of contractual savings and non-life insurance companies, the shares of stocks in the portfolios of contractual savings and non-life insurance companies, and the value traded stocks. Stock market capitalization is negatively correlated with the real interest rate, the real return on money (measured by the inverse of inflation), and stock market volatility. Stock market value traded is positively correlated with the shares of stocks in the portfolios of contractual savings and non-life insurance companies, and the real return on money. It is negatively correlated with the real interest rate. The authors conclude that insurance and contractual savings are powerful instruments for developing stock markets, providing depth and liquidity. Higher liquidity, in turn, further promotes market capitalization. 2014-08-27T20:21:29Z 2014-08-27T20:21:29Z 2000-11 http://documents.worldbank.org/curated/en/2000/11/748749/contractual-savings-stock-asset-markets http://hdl.handle.net/10986/19779 English en_US Policy Research Working Paper;No. 2490 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