Investment Behaviour of Institutional Investors

G Rubbaniy

Research output: Types of ThesisDoctoral ThesisExternally prepared


This study examines the portfolio choice anomalies and trading strategies of two types of institutional investors, Dutch pension funds (PFs) and US mutual funds (MFs), and presents some explanation for the unexpected behaviour in their trading. Particularly we focus on the determinants of home bias, feedback trading and herding in the investment behaviour of these institutional investors. We find that Dutch PFs¿ domestic share in portfolio allocation (`home bias¿) diminishes over time, and that fund characteristics, such as economies of scale, experience, funding status and pension plan (DB or DC), significantly affect their asset allocation across multiple asset classes and markets. We disprove the theory that all PFs are passive traders by finding that Dutch PFs display a monthly turnover rate of approximately 8.5%. We find strong evidence for contrarian trading by Dutch PFs on an aggregate basis; however, it varies considerably across asset classes. Furthermore, we find that lagged institutional demand for a security drives momentum investment in riskier assets and contrarian investment in less risky assets. A security¿s contemporaneous and lagged performance drives contrarian investments across asset classes. Using quarterly holdings of US equity MFs we investigate the herding dynamics in their long-term trading behaviour and find that funds styles, market volatility, the increased participation of MFs in the financial markets and MFs size/capitalization are important determinants of herding dynamics in their trading behaviour. The results endorse one of our hypotheses that ¿in the long term, US equity mutual funds limit themselves to certain stock characteristics¿.
Original languageEnglish
Awarding Institution
  • Erasmus University Rotterdam
  • Verschoor, Supervisor
  • Smit, Han, Doctoral committee member
  • Steenbeek, Onno, Doctoral committee member
  • de Jong, Doctoral committee member
  • Lelyveld van, Co-supervisor
Award date31 May 2013
Place of PublicationRotterdam
Print ISBNs9789058923363
Publication statusPublished - 31 May 2013


Dive into the research topics of 'Investment Behaviour of Institutional Investors'. Together they form a unique fingerprint.

Cite this