Essays on pension funds in emerging market countries

This thesis consists of three essays on pension funds (PFs) in emerging market (EM) countries. The first essay focuses on designing a life-cycle fund model for the pension system in Turkey, which is adapted to its demographics and financial market structure. The findings indicate that human capital risk and its correlation with stock returns play a particularly important role in the design of life-cycle funds and significantly reduce the optimal equity allocation in the long term. Moreover, it is found that parameter uncertainty does not cause significant differences in the optimal portfolio allocations of investors, particularly those with a high degree of risk aversion. The second essay investigates the effect of PFs on stock market liquidity in 17 EM countries for the period 2006–2019 using three liquidity measures: Zeros, Roll, and Amihud. The results indicate that PFs supply liquidity to stock markets as measured by Zeros and Amihud measures, and this liquidity provision is also pronounced in times of crisis. These findings pass several robustness checks, such as a sample split, excluding crisis periods, alternative control variables, excluding outlier countries, and endogeneity bias. The third essay provides an overview of private pension systems in developing countries, including current challenges and future directions. Desirable financial, behavioral, and technological developments are suggested in this study for strengthening private pension systems in developing countries.