Jacob Bikker - Academia.edu (original) (raw)
Papers by Jacob Bikker
This paper assesses the sophistication of pension funds' investment policies using data on 74... more This paper assesses the sophistication of pension funds' investment policies using data on 748 Dutch pension funds during the 19992006 period. We develop three indicators of sophistication: gross rounding of investment choices, investments in alternative sophisticated asset classes and home bias'. We find that pension funds' strategic portfolio choices are often based on coarse and possibly less sophisticated approaches. Most
The economic literature pays a great deal of attention to the performance of banks, expressed in ... more The economic literature pays a great deal of attention to the performance of banks, expressed in terms of competition, concentration, efficiency, productivity and profitability. This book provides an all-embracing framework for the various existing theories in this area and illustrates these theories with practical applications.
The new Basel Capital Accord will result in more risk sensitive regulatory capital for banks. Lik... more The new Basel Capital Accord will result in more risk sensitive regulatory capital for banks. Likewise, financial conglomerates' internal models will become more important in group-wide supervision. Such models are relatively well developed for market and credit risk but for others, such as operational risk, many issues remain to be resolved. An even greater challenge is the development of models that aggregate risks across risk areas and business units, in particular across bank and insurance activities. Such internal economic capital models should deliver the total amount of capital needed to cover risks, as perceived by a financial conglomerate. An important determinant of total risk, and hence capital, are the diversification effect that the combination of different activities, such as banking and insurance, might offer. Two empirical analyses investigate cross-sector correlations and diversification effects in order to find the optimal level of capital for Financial Conglom...
A renewed interest in decentralization has profoundly affected local public governance around the... more A renewed interest in decentralization has profoundly affected local public governance around the world. Faced with an increasing number of tasks, Dutch municipalities have recently sought physical centralization, merging into larger jurisdictions in order to target new policy areas more effectively and cost efficiently. Is such a policy of physical centralization wise? We study economies of scale in local public administration, and find – given transfer payments from central government and current cooperation between municipalities and after controlling for geographical, demographic and socio-economic variables – substantial unused scale economies of 20% for the average municipality. Between 2005 and 2014 the optimum size of municipalities increases from around 49,000 to 66,260 inhabitants, pointing at an increased importance of fixed costs relative to variable costs in local public administration. For other local government activities, we find either lower or no optimum scales.
In the Netherlands, the typical pension contract nowadays comprises an average earnings defined b... more In the Netherlands, the typical pension contract nowadays comprises an average earnings defined benefit pension in which only nominal benefits are guaranteed, but with the intention to provide wage indexation. In the new supervisory regime, the guaranteed pension rights, based on market valuation, are subject to risk-based solvency requirements. Provisioning is not required for conditional pension rights, though contributions have to be consistent with the indexation ambition, as communicated with the participants. This paper analyses to what extent indexation is indeed likely, given different indexation and contribution policies. Thereby, it explains how intergenerational risk sharing in defined benefit pension plans can provide a reasonable insurance of pension benefits against wage or price inflation. Moreover, it illustrates the tenability of defined benefit pension plans under ageing, the new fair-value accounting regimes, and possible volatility on financial markets. The analy...
Using a measure of competition based on the Panzar-Rosse model, this paper explains bank competit... more Using a measure of competition based on the Panzar-Rosse model, this paper explains bank competition across 76 countries on the basis of various determinants. Studies explaining banking competition are rare and typically insuffciently robust as they are based on a limited number of countries only. Traditionally, market structure indicators, such as the number of banks and banking concentration, have been
This paper is the first to analyze market impact and execution costs of equity trading by a pensi... more This paper is the first to analyze market impact and execution costs of equity trading by a pension fund. We find that, on average, these costs are nonnegligible. Average market impact costs equal 20 basis points for buys and 30 basis points for sells; average execution costs equal 27 basis points and 38 basis points, respectively. Furthermore, we show that
This paper is the first to analyze the price effects of equity trading by a pension fund. We find... more This paper is the first to analyze the price effects of equity trading by a pension fund. We find that, on average, these effects are nonðnegligible: 20 basis points for buys and 26 basis points for sells. Furðthermore, we show that (relative) trade size and market capitalization, commonly found to play an important role, have only limited influðence on the
This paper assesses the determinants of market impact costs of institutional equity trades, using... more This paper assesses the determinants of market impact costs of institutional equity trades, using unique data from the world’s second largest pension fund. We allow the impact of trade characteristics and market conditions on trading costs to depend on the level of trading costs itself and establish significant differences in the responses of cheaper and more expensive trades. We explain
This article examines the impact of participants' age distribution on the asset allocation of Dut... more This article examines the impact of participants' age distribution on the asset allocation of Dutch pension funds, using a unique data set of pension fund investment plans for 2007. Theory predicts a negative effect of age on (strategic) equity exposures. We observe that a 1-year higher average age in active participants leads to a significant and robust reduction of the strategic equity exposure by around 0.5 percentage point. Larger pension funds show a stronger age-equity exposure effect. The average age of active participants influences investment behavior more strongly than the average age of all participants, which is plausible as retirees no longer possess any human capital.
Ethical Theory and Moral Practice, 2009
The first part of this paper provides a systematic discussion of the structural problems of compe... more The first part of this paper provides a systematic discussion of the structural problems of competition on financial markets as observed from the demand and from the supply side, using a diagnostic framework. Potential impediments to competition are concentration, entry barriers, lack of transparency, product complexity, switching and search costs, financial illiteracy, lack of consumer power and weak intermediaries. In
This article examines the impact of participants' age distribution on the asset allocation of Dut... more This article examines the impact of participants' age distribution on the asset allocation of Dutch pension funds, using a unique data set of pension fund investment plans for 2007. Theory predicts a negative effect of age on (strategic) equity exposures. We observe that a 1-year higher average age in active participants leads to a significant and robust reduction of the strategic equity exposure by around 0.5 percentage point. Larger pension funds show a stronger age-equity exposure effect. The average age of active participants influences investment behavior more strongly than the average age of all participants, which is plausible as retirees no longer possess any human capital.
Journal of Geophysical Research, 2007
Using a measure of competition based on the Panzar-Rosse model, this paper explains bank competit... more Using a measure of competition based on the Panzar-Rosse model, this paper explains bank competition across 76 countries on the basis of various determinants. Studies explaining banking competition are rare and typically insuffciently robust as they are based on a limited number of countries only. Traditionally, market structure indicators, such as the number of banks and banking concentration, have been
Over the past few decades, the worldwide banking industry has undergone strong consolidation. As ... more Over the past few decades, the worldwide banking industry has undergone strong consolidation. As a result, the number of banks has fallen sharply. At the same time, the size of the largest banks has increased substantially, both in absolute figures and relative to the size of smaller banks. This paper analyzes the impact of this development on competition by assessing
SSRN Electronic Journal, 2000
ABSTRACT The Panzar-Rosse model is a widely applied method to assess competitive conduct. In part... more ABSTRACT The Panzar-Rosse model is a widely applied method to assess competitive conduct. In particular, it has been extensively used to analyze the competitive climate in the banking industry. To correct for differences in firm size, many empirical papers estimate a Panzar-Rosse revenue function with total assets (or another proxy of firm size) as a control variable. Other studies estimate a Panzar-Rosse price function instead of a revenue equation, in which the dependent variable is total revenue divided by total assets. This paper shows that both a scaled Panzar-Rosse revenue equation and a Panzar-Rosse price function cannot be used to infer the degree of competition. Only an unscaled revenue equation yields a valid measure for competitive conduct. Furthermore, we show that the appropriate Panzar-Rosse test, based on an unscaled revenue equation, generally requires additional information about costs and market equilibrium to allow meaningful interpretations. Our theoretical findings are confirmed by an empirical analysis of competition in the banking industry, based on a sample covering more than 110,000 bank-year observations on almost 18,000 banks in 67 countries during the period 1986-2004.
SSRN Electronic Journal, 2000
This paper is the first to analyze the price effects of equity trading by a pension fund. We find... more This paper is the first to analyze the price effects of equity trading by a pension fund. We find that, on average, these effects are nonnegligible: 20 basis points for buys and 26 basis points for sells. Furthermore, we show that (relative) trade size and market capitalization, commonly found to play an important role, have only limited influence on the price impact of a trade. The most important determinants of the price effect are investment style, trade type (agency, single, or principal), momentum, stock price volatility, and trading venue.
This paper assesses the sophistication of pension funds' investment policies using data on 74... more This paper assesses the sophistication of pension funds' investment policies using data on 748 Dutch pension funds during the 19992006 period. We develop three indicators of sophistication: gross rounding of investment choices, investments in alternative sophisticated asset classes and home bias'. We find that pension funds' strategic portfolio choices are often based on coarse and possibly less sophisticated approaches. Most
The economic literature pays a great deal of attention to the performance of banks, expressed in ... more The economic literature pays a great deal of attention to the performance of banks, expressed in terms of competition, concentration, efficiency, productivity and profitability. This book provides an all-embracing framework for the various existing theories in this area and illustrates these theories with practical applications.
The new Basel Capital Accord will result in more risk sensitive regulatory capital for banks. Lik... more The new Basel Capital Accord will result in more risk sensitive regulatory capital for banks. Likewise, financial conglomerates' internal models will become more important in group-wide supervision. Such models are relatively well developed for market and credit risk but for others, such as operational risk, many issues remain to be resolved. An even greater challenge is the development of models that aggregate risks across risk areas and business units, in particular across bank and insurance activities. Such internal economic capital models should deliver the total amount of capital needed to cover risks, as perceived by a financial conglomerate. An important determinant of total risk, and hence capital, are the diversification effect that the combination of different activities, such as banking and insurance, might offer. Two empirical analyses investigate cross-sector correlations and diversification effects in order to find the optimal level of capital for Financial Conglom...
A renewed interest in decentralization has profoundly affected local public governance around the... more A renewed interest in decentralization has profoundly affected local public governance around the world. Faced with an increasing number of tasks, Dutch municipalities have recently sought physical centralization, merging into larger jurisdictions in order to target new policy areas more effectively and cost efficiently. Is such a policy of physical centralization wise? We study economies of scale in local public administration, and find – given transfer payments from central government and current cooperation between municipalities and after controlling for geographical, demographic and socio-economic variables – substantial unused scale economies of 20% for the average municipality. Between 2005 and 2014 the optimum size of municipalities increases from around 49,000 to 66,260 inhabitants, pointing at an increased importance of fixed costs relative to variable costs in local public administration. For other local government activities, we find either lower or no optimum scales.
In the Netherlands, the typical pension contract nowadays comprises an average earnings defined b... more In the Netherlands, the typical pension contract nowadays comprises an average earnings defined benefit pension in which only nominal benefits are guaranteed, but with the intention to provide wage indexation. In the new supervisory regime, the guaranteed pension rights, based on market valuation, are subject to risk-based solvency requirements. Provisioning is not required for conditional pension rights, though contributions have to be consistent with the indexation ambition, as communicated with the participants. This paper analyses to what extent indexation is indeed likely, given different indexation and contribution policies. Thereby, it explains how intergenerational risk sharing in defined benefit pension plans can provide a reasonable insurance of pension benefits against wage or price inflation. Moreover, it illustrates the tenability of defined benefit pension plans under ageing, the new fair-value accounting regimes, and possible volatility on financial markets. The analy...
Using a measure of competition based on the Panzar-Rosse model, this paper explains bank competit... more Using a measure of competition based on the Panzar-Rosse model, this paper explains bank competition across 76 countries on the basis of various determinants. Studies explaining banking competition are rare and typically insuffciently robust as they are based on a limited number of countries only. Traditionally, market structure indicators, such as the number of banks and banking concentration, have been
This paper is the first to analyze market impact and execution costs of equity trading by a pensi... more This paper is the first to analyze market impact and execution costs of equity trading by a pension fund. We find that, on average, these costs are nonnegligible. Average market impact costs equal 20 basis points for buys and 30 basis points for sells; average execution costs equal 27 basis points and 38 basis points, respectively. Furthermore, we show that
This paper is the first to analyze the price effects of equity trading by a pension fund. We find... more This paper is the first to analyze the price effects of equity trading by a pension fund. We find that, on average, these effects are nonðnegligible: 20 basis points for buys and 26 basis points for sells. Furðthermore, we show that (relative) trade size and market capitalization, commonly found to play an important role, have only limited influðence on the
This paper assesses the determinants of market impact costs of institutional equity trades, using... more This paper assesses the determinants of market impact costs of institutional equity trades, using unique data from the world’s second largest pension fund. We allow the impact of trade characteristics and market conditions on trading costs to depend on the level of trading costs itself and establish significant differences in the responses of cheaper and more expensive trades. We explain
This article examines the impact of participants' age distribution on the asset allocation of Dut... more This article examines the impact of participants' age distribution on the asset allocation of Dutch pension funds, using a unique data set of pension fund investment plans for 2007. Theory predicts a negative effect of age on (strategic) equity exposures. We observe that a 1-year higher average age in active participants leads to a significant and robust reduction of the strategic equity exposure by around 0.5 percentage point. Larger pension funds show a stronger age-equity exposure effect. The average age of active participants influences investment behavior more strongly than the average age of all participants, which is plausible as retirees no longer possess any human capital.
Ethical Theory and Moral Practice, 2009
The first part of this paper provides a systematic discussion of the structural problems of compe... more The first part of this paper provides a systematic discussion of the structural problems of competition on financial markets as observed from the demand and from the supply side, using a diagnostic framework. Potential impediments to competition are concentration, entry barriers, lack of transparency, product complexity, switching and search costs, financial illiteracy, lack of consumer power and weak intermediaries. In
This article examines the impact of participants' age distribution on the asset allocation of Dut... more This article examines the impact of participants' age distribution on the asset allocation of Dutch pension funds, using a unique data set of pension fund investment plans for 2007. Theory predicts a negative effect of age on (strategic) equity exposures. We observe that a 1-year higher average age in active participants leads to a significant and robust reduction of the strategic equity exposure by around 0.5 percentage point. Larger pension funds show a stronger age-equity exposure effect. The average age of active participants influences investment behavior more strongly than the average age of all participants, which is plausible as retirees no longer possess any human capital.
Journal of Geophysical Research, 2007
Using a measure of competition based on the Panzar-Rosse model, this paper explains bank competit... more Using a measure of competition based on the Panzar-Rosse model, this paper explains bank competition across 76 countries on the basis of various determinants. Studies explaining banking competition are rare and typically insuffciently robust as they are based on a limited number of countries only. Traditionally, market structure indicators, such as the number of banks and banking concentration, have been
Over the past few decades, the worldwide banking industry has undergone strong consolidation. As ... more Over the past few decades, the worldwide banking industry has undergone strong consolidation. As a result, the number of banks has fallen sharply. At the same time, the size of the largest banks has increased substantially, both in absolute figures and relative to the size of smaller banks. This paper analyzes the impact of this development on competition by assessing
SSRN Electronic Journal, 2000
ABSTRACT The Panzar-Rosse model is a widely applied method to assess competitive conduct. In part... more ABSTRACT The Panzar-Rosse model is a widely applied method to assess competitive conduct. In particular, it has been extensively used to analyze the competitive climate in the banking industry. To correct for differences in firm size, many empirical papers estimate a Panzar-Rosse revenue function with total assets (or another proxy of firm size) as a control variable. Other studies estimate a Panzar-Rosse price function instead of a revenue equation, in which the dependent variable is total revenue divided by total assets. This paper shows that both a scaled Panzar-Rosse revenue equation and a Panzar-Rosse price function cannot be used to infer the degree of competition. Only an unscaled revenue equation yields a valid measure for competitive conduct. Furthermore, we show that the appropriate Panzar-Rosse test, based on an unscaled revenue equation, generally requires additional information about costs and market equilibrium to allow meaningful interpretations. Our theoretical findings are confirmed by an empirical analysis of competition in the banking industry, based on a sample covering more than 110,000 bank-year observations on almost 18,000 banks in 67 countries during the period 1986-2004.
SSRN Electronic Journal, 2000
This paper is the first to analyze the price effects of equity trading by a pension fund. We find... more This paper is the first to analyze the price effects of equity trading by a pension fund. We find that, on average, these effects are nonnegligible: 20 basis points for buys and 26 basis points for sells. Furthermore, we show that (relative) trade size and market capitalization, commonly found to play an important role, have only limited influence on the price impact of a trade. The most important determinants of the price effect are investment style, trade type (agency, single, or principal), momentum, stock price volatility, and trading venue.