Assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives

Boubaker, Sabri; Gounopoulos, Dimitrios; Nguyen, Duc Khuong; Paltalidis, Nikos

doi:10.1016/j.jbankfin.2016.12.007

Cited by 26 publications

(20 citation statements)

References 60 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…A título de comparação, a experiência brasileira parece conflitar com o cenário norte-americano, onde as políticas de redução da taxa de juros junto com políticas monetárias não convencionais foram responsáveis pela alteração do portfólio dos pension funds, que passaram a investir mais em ativos mais arriscados, especialmente em ativos de renda variável (Chodorow-Reich, 2014;Boubaker, Gounopoulos, Nguyen & Paltalidis, 2017), que por sua vez são uma parcela ínfima do portfólio das EAPCs, como podemos ver na figura 4. Os dados de alocação dos pension funds disponibilizados pela CEM Benchmarking e expostos na figura 5 evidenciam a diferença na alocação de portfólio.…”

Section: Figura 5 Alocação De Portfólio De Pension Fundsunclassified

“…Por fim, o estudo procura contribuir para uma literatura ainda escassa sobre efeitos de fatores exógenos, como variáveis macroeconômicas, sobre o comportamento de aspectos relevantes da indústria de Previdência Complementar. Destacam-se os mais relevantes como Chodorow-Reich (2014) e Boubaker et al (2017), que procuraram avaliar a composição de portfólio e tomada de risco de pension funds nos Estados Unidos em um cenário de juros persistentemente baixos.…”

Section: Figura 6 Detentores Dos Títulos Públicos Federaisunclassified

“…3.1 Pension Funds e sensibilidade à política monetária Boubaker et al (2017) foram responsáveis por avaliar os impactos da política monetária americana de taxas de juros consistentemente baixas e próximas de zero e de práticas não convencionais sobre a alocação de portfólio e tomada de risco por parte dos fundos públicos de pensão americanos. Como os próprios autores ressaltam, o estudo contribui para chamar a atenção para o impacto de fatores macroeconômicos sobre a indústria de previdência, uma vez que a literatura se concentra em torno de aspectos endógenos a esse mercado, como questões relacionadas a regulações específicas.…”

Section: Literatura Relacionadaunclassified

See 2 more Smart Citations

Regulação ineficaz para forçar alongamento: O caso da Previdência Complementar Aberta no Brasil

Carpizo

García

2019

Braz. Rev. Fin.

View full text Add to dashboard Cite

ResumoApesar da queda da taxa de juros observada no Brasil nas últimas décadas, combinada com regulações especificas sobre a Previdência Complementar Aberta que incentivam a tomada de risco de longo prazo, as instituições desse segmento aparentam ser consideravelmente sensíveis a fatores de curto prazo, ao mesmo tempo que evitam exposição a fatores de risco de prazos longos. Com dados de alocação de portfólio de grandes entidades, implementamos um modelo VAR para avaliar o impacto da taxa de juros sobre decisões de gestão de carteira e realizamos uma análise contrafactual a fim de definir o efeito causal da regulação sobre a tomada adicional de risco. Os resultados indicam que aumentos na taxa de juros geram reduções significantes e persistentes de investimentos em ativos mais arriscados e de maior maturidade, ao passo que a regulação implementada não foi capaz de forçar a maior tomada de risco por parte das instituições, além de gerar distorções em segmentos do mercado financeiro brasileiro.Palavras-chave: Previdência Complementar Aberta; Portfólio; Taxa de juros; Longo Prazo; Regulação.Código JEL: E43, G11, G28, J32. AbstractDespite the fall in the interest rate observed in Brazil in recent decades, and specific regulations on the private pension segment that encourage long-term risk taking, institutions in this segment appear to be considerably sensitive to short-term factors, while avoiding exposure to long-term risk factors. With portfolio allocation data from large entities, we implemented a VAR model to evaluate the impact of interest rate changes on portfolio management decisions and performed a counterfactual analysis to define the causal effect of regulation on additional risk taking. Results indicate that interest rate increases lead to significant and persistent reduction of investment in riskier assets with longer maturities, while the implemented regulation was not able to force greater risk-taking by institutions, in addition to generating distortions in segments of the Brazilian financial market.

show abstract

Section: Figura 5 Alocação De Portfólio De Pension Fundsunclassified

Section: Figura 6 Detentores Dos Títulos Públicos Federaisunclassified

Section: Literatura Relacionadaunclassified

See 1 more Smart Citation

Regulação ineficaz para forçar alongamento: O caso da Previdência Complementar Aberta no Brasil

Carpizo

García

2019

Braz. Rev. Fin.

View full text Add to dashboard Cite

show abstract

“…Such a policy has been shown to incentivize financial actors towards more volatile investment strategies, opening the door for increasingly costly operational mistakes (see, e.g. Delis and Kouretas [2011] and Boubaker et al [2017]). Indeed, when market volatility is high, huge adverse market movements tend to be more likely.…”

Section: Economic Interpretation Of the Dependence Structurementioning

confidence: 99%

Understanding the economic determinants of the severity of operational losses: A regularized generalized Pareto regression approach

Hambuckers

Groll

Kneib

2018

J of Applied Econometrics

View full text Add to dashboard Cite

We investigate a novel database of 10,217 extreme operational losses from the Italian bank UniCredit. Our goal is to shed light on the dependence between the severity distribution of these losses and a set of a set of macroeconomic, financial and firmspecific factors. To do so, we use Generalized Pareto regression techniques, where both the scale and shape parameters are assumed to be functions of these explanatory variables. We perform the selection of the relevant covariates with a state-of-the-art penalized-likelihood estimation procedure relying on L 1 -penalty terms. A simulation study indicates that this approach efficiently selects covariates of interest and tackles spurious regression issues encountered when dealing with integrated time series. Lastly, we illustrate the impact of different economic scenarios on the requested capital for operational risk. Our results have important implications in terms of risk management and regulatory policy.

show abstract

“…Andonov et al (2017)'s cross-country study provides evidence consistent with this theory. However, Boubaker et al (2018) find that given their asset holdings, PPFs tend to significantly exaggerate the expected returns on their assets; which means they do not necessarily have to hold riskier assets in order to mask a part of their underfunding. This phenomenon is partly illustrated in Figure 1 (panel a), which shows that public pension funds' expected return targets have declined little while the Treasury yields have significantly declined.…”

Section: Introductionmentioning

confidence: 95%

Reach for Yield by U.S. Public Pension Funds

Liu¹,

Pritsker

Zlate

et al. 2019

FEDS

View full text Add to dashboard Cite

This paper studies whether U.S. public pension funds reach for yield by taking more investment risk in a low interest rate environment. To study funds' risk-taking behavior, we first present a simple theoretical model relating risk-taking to the level of risk-free rates, to their underfunding, and to the fiscal condition of their state sponsors. The theory identifies two distinct channels through which interest rates and other factors may affect risk-taking: by altering plans' funding ratios, and by changing risk premia. The theory also shows the effect of state finances on funds' risk-taking depends on incentives to shift risk to state debt holders. To study the determinants of risk-taking empirically, we create a new methodology for inferring funds' risk from limited public information on their annual returns and portfolio weights for the interval 2002-2016. In order to better measure the extent of underfunding, we revalue funds' liabilities using discount rates that better reflect their risk. We find that funds on average took more risk when risk-free rates and funding ratios were lower, which is consistent with both the funding ratio and the riskpremia channels. Consistent with risk-shifting, we also find more risk-taking for funds affiliated with state or municipal sponsors with weaker public finances. We estimate that up to one-third of the funds' total risk was related to underfunding and low interest rates at the end of our sample period.

show abstract

Assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives

Cited by 26 publications

References 60 publications

Regulação ineficaz para forçar alongamento: O caso da Previdência Complementar Aberta no Brasil

Regulação ineficaz para forçar alongamento: O caso da Previdência Complementar Aberta no Brasil

Understanding the economic determinants of the severity of operational losses: A regularized generalized Pareto regression approach

Reach for Yield by U.S. Public Pension Funds

Contact Info

Product

Resources

About