Tail risk in pension funds: an analysis using ARCH models and bilinear processes

Owadally, Iqbal

doi:10.1007/s11156-013-0373-9

Jumping over a low hurdle: personal pension fund performance

Petraki

¹

,

Zalewska

²

2015

Rev Quant Finan Acc

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This study analyses a sample of 8,255 UK personal pension funds operated by 60 providers over a 30 years ' period (1980 -2009) in order to assess their short-and long-term performance and argues that it is inappropriate to evaluate pension funds using methods applied to evaluate mutual funds. We find strong evidence that pension funds outperform their Primary Prospectus Benchmarks (PPBs). However, we argue that this is because the PPBs are not challenging, and pension funds invest outside the PPBs, giving the funds the opportunity to better diversify risk. We also find that pension funds outperform T-bills in the long run, but not in the short run. We argue that this is a 'statistical' consequence of pension funds short-term tracking of the PPBs, which are more risky than T-bills. We discuss policy implications of our findings.Keywords: pension funds, portfolio performance, Sharpe ratio, benchmark selection, portfolio risk JEL Classification: G11, G18, G20, G23 Electronic version: www.bristol.ac.uk/cmpo/publications/papers/2013/wp305.pdf Acknowledgements The authors would like to thank an anonymous sponsor for funding Dr Anastasia Petraki's postdoctoral position at the Centre for Governance and Regulation (CGR), University of Bath which has made this research possible. We would also like to thank Morningstar for granting us access to their Morningstar Direct™ database. Address for correspondence AbstractThis study analyses a sample of 8,255 UK personal pension funds operated by 60 providers over a 30 years ' period (1980 -2009) in order to assess their short-and longterm performance and argues that it is inappropriate to evaluate pension funds using methods applied to evaluate mutual funds. We find strong evidence that pension funds outperform their Primary Prospectus Benchmarks (PPBs). However, we argue that this is because the PPBs are not challenging, and pension funds invest outside the PPBs, giving the funds the opportunity to better diversify risk. We also find that pension funds outperform T-bills in the long run, but not in the short run. We argue that this is a 'statistical' consequence of pension funds short-term tracking of the PPBs, which are more risky than T-bills. We discuss policy implications of our findings. Acknowledgement:The authors would like to thank an anonymous sponsor for funding Dr Anastasia Petraki's post-doctoral position at the Centre for Governance and Regulation (CGR), University of Bath, which made this research possible. We would also like to thank Morningstar for granting us access to their Morningstar Direct TM database.

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Impact of Rollover Risk and Corporate Policy on Extreme Risk in the Taiwanese Manufacturing Industry

Chiu

¹

,

Wang

²

,

Wu

³

et al. 2017

Rev. Pac. Basin Finan. Mark. Pol.

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We explore the crucial research question of whether the rollover risk effect amplifies or reduces a firm’s extreme risk through an empirical investigation of the Taiwanese manufacturing industry. We also investigate the relationship between corporate policy and extreme risk. On the basis of extensive empirical evidence from 2003 to 2014, we determine significant positive impacts on extreme risk for firms with difficulty in rolling over their maturing debts. Firms with higher investment levels in a financial crisis should consequentially have more tail risk spillover from the financial sector.

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Jumping Over a Low Hurdle: Personal Pension Fund Performance

Petraki

¹

,

Zalewska

²

2013

View full text Add to dashboard Cite

This study analyses a sample of 8,255 UK personal pension funds operated by 60 providers over a 30 years ' period (1980 -2009) in order to assess their short-and long-term performance and argues that it is inappropriate to evaluate pension funds using methods applied to evaluate mutual funds. We find strong evidence that pension funds outperform their Primary Prospectus Benchmarks (PPBs). However, we argue that this is because the PPBs are not challenging, and pension funds invest outside the PPBs, giving the funds the opportunity to better diversify risk. We also find that pension funds outperform T-bills in the long run, but not in the short run. We argue that this is a 'statistical' consequence of pension funds short-term tracking of the PPBs, which are more risky than T-bills. We discuss policy implications of our findings.Keywords: pension funds, portfolio performance, Sharpe ratio, benchmark selection, portfolio risk JEL Classification: G11, G18, G20, G23 Electronic version: www.bristol.ac.uk/cmpo/publications/papers/2013/wp305.pdf Acknowledgements The authors would like to thank an anonymous sponsor for funding Dr Anastasia Petraki's postdoctoral position at the Centre for Governance and Regulation (CGR), University of Bath which has made this research possible. We would also like to thank Morningstar for granting us access to their Morningstar Direct™ database. Address for correspondence AbstractThis study analyses a sample of 8,255 UK personal pension funds operated by 60 providers over a 30 years ' period (1980 -2009) in order to assess their short-and longterm performance and argues that it is inappropriate to evaluate pension funds using methods applied to evaluate mutual funds. We find strong evidence that pension funds outperform their Primary Prospectus Benchmarks (PPBs). However, we argue that this is because the PPBs are not challenging, and pension funds invest outside the PPBs, giving the funds the opportunity to better diversify risk. We also find that pension funds outperform T-bills in the long run, but not in the short run. We argue that this is a 'statistical' consequence of pension funds short-term tracking of the PPBs, which are more risky than T-bills. We discuss policy implications of our findings. Acknowledgement:The authors would like to thank an anonymous sponsor for funding Dr Anastasia Petraki's post-doctoral position at the Centre for Governance and Regulation (CGR), University of Bath, which made this research possible. We would also like to thank Morningstar for granting us access to their Morningstar Direct TM database.

show abstract

Tail risk in pension funds: an analysis using ARCH models and bilinear processes

Cited by 3 publications

References 51 publications

Jumping over a low hurdle: personal pension fund performance

Jumping over a low hurdle: personal pension fund performance

Impact of Rollover Risk and Corporate Policy on Extreme Risk in the Taiwanese Manufacturing Industry

Jumping Over a Low Hurdle: Personal Pension Fund Performance

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