IDEAS home Printed from https://ideas.repec.org/a/cbu/jrnlec/y2024v6iip91-97.html
   My bibliography  Save this article

Power Players: Do Pension Funds Drive Stock Market Growth In The European Union?

Author

Listed:
  • MILOS LAURA RAISA

    (BABES-BOLYAI UNIVERSITY, FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION, DEPARTMENT OF BUSINESS ADMINISTRATION-RESITA)

  • MILOS MARIUS CRISTIAN

    (BABES-BOLYAI UNIVERSITY, FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION, DEPARTMENT OF BUSINESS ADMINISTRATION-RESITA)

Abstract

This study investigates the role of pension fund assets (PFA) in driving stock market development across the European Union from 2005 to 2022, using market capitalization as % in GDP as a proxy for stock market growth. Employing a fixed-effects model, we examine the impact of PFA alongside several key economic controls, including domestic credit to the private sector, GDP growth, inflation, gross domestic savings, trade openness, and foreign direct investment inflows. Our findings reveal a strong, positive, and statistically significant relationship between PFA and market capitalization. Specifically, a one-unit increase in pension fund assets is associated with a 0.574 percentage point increase in market capitalization as a share of GDP, underscoring the role that pension funds play in enhancing stock market activity and liquidity.Among the control variables, domestic credit to private sector by banks, GDP growth and gross domestic savings exhibit significant positive effects, suggesting that financial and economic expansion and higher savings rates support stock market growth by improving market liquidity and boosting investor confidence. Inflation also shows a positive association with market capitalization, suggesting that moderate inflation may reflect economic dynamism, thereby attracting investment. Conversely, trade openness has a negative relationship with market capitalization, potentially reflecting increased exposure to external economic shocks or capital outflows. Foreign direct investment, while showing a small positive effect, is not statistically significant.Overall, these findings highlight the importance of pension funds in fostering stock market growth and provide policymakers with insights into strategies for financial development in the EU.

Suggested Citation

  • Milos Laura Raisa & Milos Marius Cristian, 2024. "Power Players: Do Pension Funds Drive Stock Market Growth In The European Union?," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 91-97, December.
    • Handle: RePEc:cbu:jrnlec:y:2024:v:6ii:p:91-97
    as

    Download full text from publisher

    File URL: https://www.utgjiu.ro/revista/ec/pdf/2024-06,%20Volumul%20II/10_Milos.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gazmore Rexhepi & Burim Gashi, 2022. "The Role of Pension Funds on Capital Market Growth in the New EU Member States," Ekonomista, Polskie Towarzystwo Ekonomiczne, issue 4, pages 437-454.
    2. Babalos, Vassilios & Stavroyiannis, Stavros, 2020. "Pension funds and stock market development in OECD countries: Novel evidence from a panel VAR," Finance Research Letters, Elsevier, vol. 34(C).
    3. Cosmin Enache & Laura Raisa Miloş & Marius Cristian Miloş, 2015. "Pension reform and capital market development in Central and Eastern European countries," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 28(1), pages 75-84, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wang, Kai-Hua & Zhao, Yan-Xin & Jiang, Cui-Feng & Li, Zheng-Zheng, 2022. "Does green finance inspire sustainable development? Evidence from a global perspective," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 412-426.
    2. Kumeka, Terver Theophilus & Uzoma-Nwosu, Damian Chidozie & David-Wayas, Maria Onyinye, 2022. "The effects of COVID-19 on the interrelationship among oil prices, stock prices and exchange rates in selected oil exporting economies," Resources Policy, Elsevier, vol. 77(C).
    3. Alin Marius Andrieş & Mihaela Brodocianu & Nicu Sprincean, 2023. "The role of institutional investors in the financial development," Economic Change and Restructuring, Springer, vol. 56(1), pages 345-378, February.
    4. Kacou, Kacou Yves Thierry & Kassouri, Yacouba & Evrard, Talnan Hongwopena & Altuntaş, Mehmet, 2022. "Trade openness, export structure, and labor productivity in developing countries: Evidence from panel VAR approach," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 194-205.
    5. Ji, Youmeng & Wu, Xiangli & Wang, Limin, 2024. "Spatial correlation network and influencing factors analysis of supply efficiency of basic public service (SEBPS) in rust belt regions of China: An empirical study from Northeast China," Socio-Economic Planning Sciences, Elsevier, vol. 96(C).
    6. Gudjonsson Jon & Hougaard Jensen Svend E., 2023. "Pension Funds and Financial Stability: The Case of the UK Gilt Crisis," Intereconomics: Review of European Economic Policy, Sciendo, vol. 58(3), pages 155-159, June.
    7. Yilmaz Bayar & Marius Dan Gavriletea & Dan Constantin Danuletiu & Adina Elena Danuletiu & Emre Sakar, 2022. "Pension Funds, Insurance Companies and Stock Market Development: Evidence from Emerging Markets," Mathematics, MDPI, vol. 10(13), pages 1-13, July.
    8. Hyeladi Stanley Dibal & Habila Abel Haruna & Chinyere C. Onyejiaku & Ogbole Friday Ogbole & Josaphat Uchechukwu J. Onwumere, 2024. "Pension Fund Investments and Capital Market Development in Nigeria: The Moderating Role of Inflation," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 16(2), pages 248-269, May.
    9. Mariam Voskanyan, 2023. "Funded Pension System Of Armenia: Problems, Development Prospects, Role In Economic Growth," Economic Archive, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 1 Year 20, pages 3-23.
    10. Gazmore Rexhepi & Burim Gashi, 2022. "The Role of Pension Funds on Capital Market Growth in the New EU Member States," Ekonomista, Polskie Towarzystwo Ekonomiczne, issue 4, pages 437-454.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cbu:jrnlec:y:2024:v:6ii:p:91-97. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ecobici Nicolae The email address of this maintainer does not seem to be valid anymore. Please ask Ecobici Nicolae to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/fetgjro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.