The impact of the retirement age increase announcement on the Dutch stock market

  • Gijs van Hunsel Gijs van Hunsel

This thesis studies the reaction of the announcement of the retirement age increase in the Dutch media on the Dutch stock market. This is done by an event study approach, which uses the market model as benchmark for obtaining the predicted abnormal returns. Goyal (2004) pointed out that an increase in the relative size of the pre-retirement cohort will lead to lower stock returns. Furthermore, Geanakoplos, Magill, and Quinzii (2004) pointed out that an increase in the ratio of the pre-retirement cohort to the young cohort will lead to lower stock returns as well. Consequently, this thesis tests the hypothesis that the announcement of the retirement age increase has a negative impact on the Dutch stock market. When looking at the results, the data reveals a negative abnormal return pattern around the event data which is driven by the period prior to the event. This can be explained by the fact that rumors about the new legislation were discussed earlier in several newspapers. Besides this, the abnormal return pattern prior to the announcement data is driven by Dutch large- and small-cap firms for all investigated windows. On the other hand, mid-cap firms do not seem to have any abnormal return pattern. However, the mid-cap result is driven by one outlier in the dataset. As a robustness check the same event study is performed for the German stock market. This test reveals no significant abnormal stock behavior in Germany strengthening the hypothesis of abnormal stock market returns around the retirement age announcement in the Dutch stock market. Furthermore, when the firms are categorized in basic materials, consumer goods, finance, health, industrials, media, oil & gas, retail, technology, or telecom & services, data reveals that financial firms are negatively correlated with cumulative abnormal returns, whereas companies which are classified in the category media and telecom & services are positively correlated with cumulative abnormal returns.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.


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