Abstract
We study how pension fund (out)performance is influenced by a) a pension fund's activity, i.e., how much the pension fund deviates in its stock allocation from typical pension fund behavior, and b) whether the pension fund is patient in exploiting investment opportunities (measured by stock holding duration). We do not find that high activity or higher holding duration, separately, lead to higher risk adjusted returns on average. However, if high activity is paired with long-term holdings, the pension fund's performance increases. Quantitatively, if an active pension fund increases its duration by one standard deviation, annual returns tend to increase by 2.3%. Our findings indicate that some pension funds are patient enough to exploit long-term investment opportunities.
Original language | English |
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Article number | 105812 |
Pages (from-to) | 1-16 |
Number of pages | 16 |
Journal | Journal of Banking and Finance |
Volume | 115 |
Early online date | 28 Mar 2020 |
DOIs | |
Publication status | Published - Jun 2020 |
Funding
We sincerely thank three anonymous reviewers for their insightful comments and very useful suggestions. Comments from Melle Bijlsma, Jaap Bikker, Mark-Jan Boes, Dirk Broeders, Teodor Dyakov, Fieke van der Lecq, Peter Moln?r, and Alex Weissensteiner have greatly improved the paper. Colleagues at DNB STAT-VPS have been very helpful in preparing the data. All remaining errors are ours. Part of this research was completed when Katar?na Lu?ivjansk? was visiting VU Amsterdam and De Nederlandsche Bank. Financial support from the Tinbergen Institute and De Nederlandsche Bank is gratefully acknowledged. This research was also funded by the Czech Science Foundation, grant No. 16-26353S ?Sentiment and its Impact on Stock Markets?. Lu?ivjansk? is thankful for the support provided by the VEGA grant No. 1/0526/20 of the Ministry of Education, Science, Research and Sport of the Slovak Republic.
Funders | Funder number |
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Ministry of Education, Science, Research and Sport | |
Tinbergen Institute | |
Grantová Agentura České Republiky | 16-26353S |
Vedecká Grantová Agentúra MŠVVaŠ SR a SAV | 1/0526/20 |
De Nederlandsche Bank | |
Tinbergen Institute |
Keywords
- Active share
- Fund duration
- Pension funds