The Behavioural Finance Revolution
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The Behavioural Finance Revolution

A New Approach to Financial Policies and Regulations

Edited by Riccardo Viale, Shabnam Mousavi, Barbara Alemanni and Umberto Filotto

Financial markets are complex. Regulators strive to predict ways in which they can malfunction and create rules to prevent this from happening, yet behavioural impacts are often overlooked. This book explores how behavioural finance can go hand-in-hand with traditional methods to help banks and regulators create better policies. It also demonstrates how the behavioural finance revolution has opened the way to a more integrated approach to the analysis of economic phenomena.
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Chapter 18: CMU and the role of institutional investors: investment behavior and governance of pension funds

Cristina Giorgiantonio and Zeno Rotondi

Abstract

SME growth is firmly on the EU political agenda and has been heavily underscored in the European Commission’s Capital Markets Union (CMU) action plan. In this perspective, institutional investors and in particular pension funds have been seen as a key source of long-term capital for SMEs. Unfortunately, in too many European countries, including Italy, pension fund investments in equities remain low. This chapter reviews the related literature and discusses policy proposals aimed at fostering the role of pension funds in providing “patient” capital to the real economy. At the European level, the CMU should foster the creation of an effective European internal market for pension funds, promoting standardized rules for institutional investors to spur foreign investments and avoiding discriminatory taxation for cross-border investments. At the Italian level, it is important improve the governance of pension funds and promote initiatives for the aggregation of pension funds aimed at rationalizing the sector.

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