Portable Alphas from Pension Mispricing
25 Pages Posted: 19 Oct 2005 Last revised: 25 Feb 2012
There are 2 versions of this paper
Portable Alphas from Pension Mispricing
Portable Alphas from Pension Mispricing
Date Written: October 1, 2005
Abstract
We introduce a new dynamic trading strategy based on the systematic mispricing of U.S. companies sponsoring Defined Benefit pension plans. This portfolio produces an average return of 1.51% monthly between 1989 and 2004, with a Sharpe Ratio of 0.26. The returns of the strategy are not explained by those of primary assets. These returns are not related to those of benchmarks in the alternative investments industry either. Hence, we are in the presence of a pure alpha strategy that can be ported into a large variety of portfolios to significantly enhance their performance.
Keywords: Market Efficiency, Anomaly, Defined Benefit Plans, Portable Alpha, Enhanced Indexing, Pension Contributions
JEL Classification: D80, G11, G12, G14, G23
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Investment and Financing Constraints: Evidence from the Funding of Corporate Pension Plans
-
Taxation and Corporate Pension Policy
By Irwin Tepper
-
Earnings Manipulation, Pension Assumptions and Managerial Investment Decisions
By Daniel Bergstresser, Joshua D. Rauh, ...
-
Earnings Manipulation, Pension Assumptions and Managerial Investment Decisions
By Daniel Bergstresser, Joshua D. Rauh, ...
-
Earnings Manipulation and Managerial Investment Decisions: Evidence from Sponsored Pension Plans
By Daniel Bergstresser, Joshua D. Rauh, ...
-
Funding and Asset Allocation in Corporate Pension Plans: an Empirical Investigation
By Zvi Bodie, Randall Morck, ...
-
Did Pension Plan Accounting Contribute to a Stock Market Bubble?