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Financial Autarchy as Contagion Prevention: The Case of Colombian Pension Funds

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  • Edgardo Cayon
  • Susan Thorp

    (University of Sydney)

Abstract

Regulations restricting investment by pension funds in high risk and foreign assets may quarantine member accounts from contagious transmissions during financial crises. This paper analyses contagion from US equity markets to emerging market autarchic assets (Colombian private pension funds) during the recent financial crises. We test for contagion as changes in systematic risk between financial asset returns using an M-GARCH framework, where the S&P500 is the source of contagion to the autarchic asset. We find no evidence of contagion during the 2007-2009 crises, indicating protection to plan members from regulated portfolio restrictions during this period, but contagion from US stocks and fixed interest factors is significant during the recent sovereign debt crisis.

Suggested Citation

  • Edgardo Cayon & Susan Thorp, 2013. "Financial Autarchy as Contagion Prevention: The Case of Colombian Pension Funds," Research Paper Series 323, Quantitative Finance Research Centre, University of Technology, Sydney.
    • Handle: RePEc:uts:rpaper:323
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    References listed on IDEAS

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    Cited by:

    1. Tabak, Benjamin M. & de Castro Miranda, Rodrigo & da Silva Medeiros, Maurício, 2016. "Contagion in CDS, banking and equity markets," Economic Systems, Elsevier, vol. 40(1), pages 120-134.
    2. 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.
    3. Brzeszczyński, Janusz & Bohl, Martin T. & Serwa, Dobromił, 2019. "Pension funds, large capital inflows and stock returns in a thin market," Journal of Pension Economics and Finance, Cambridge University Press, vol. 18(3), pages 347-387, July.

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    Keywords

    emerging markets; global financial crisis; sovereign debt crisis; regulation; systematic risk;
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