This paper analyses the determinant factors of equity investments made by insurance companies, and pension funds. Brazil offers an interesting case study, because these institutional investors have a huge potential in increasing their equity investments in the future, because their investments in stocks nowadays are far below the limits imposed by regulators. Therefore, understanding what kind of companies these institutions would be willing to invest is important to help them on their efforts to attract these investors. Two kinds of analyses are performed. First, we use a logit model in order to estimate the probability for a given company to be in these investors' portfolios. Then we run regressions to analyze the determinants of the size of stock ownership of these investors in a given company. Our results indicate that these investors tend to invest in large, liquid, leveraged companies with good corporate governance practices.
The objective of this paper is to analyze the market timing capability of equity fund managers in Brazil. The active management and market timing ability of equity funds are very important to generate consistent positive returns, especially in the current volatile scenario in Brazil. We study 130 equity funds with active management using an alternative methodology for testing market timing. We use an alternative measure of market timing, based on the portfolio held by funds ("holding-based measure") in order to avoid the biases observed in the measurement of observed returns ("return-based measure"). For the period from 2006 to 2013, we find that most equity funds generally had no statistically significant market timing ability. Interestingly, the few funds that had significant market timing ability invested in companies with good governance practices. Moreover, for the funds that had timing ability, managers were based only on publicly available information to predict the market movement. We also provide evidence that market timing ability was significantly different before and after the global financial crisis.
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