A minimum variance benchmark to measure the performance of pension funds in Mexico

Oscar De la Torre Torres (), Evaristo Galeana Figueroa, María Isabel Martínez Torre Enciso and Dora Aguilasocho Montoya
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Evaristo Galeana Figueroa: Universidad Michoacana de San Nicolás de Hidalgo
María Isabel Martínez Torre Enciso: Universidad Autónoma de Madrid
Dora Aguilasocho Montoya: Universidad Michoacana de San Nicolás de Hidalgo

Contaduría y Administración, 2015, vol. 60, issue 3, 593-614

Abstract: We propose the use of the minimum variance portfolio as weighting method in a strategy benchmark for pension funds performance in Mexico. By performing three discrete event simulations with daily data from January 2002 to May 2013, we test this benchmark’s weighting method against the Max Sharpe ratio one and a linear combination of both benchmarks (minimum variance and Max Sharpe). With the Sharpe ratio, the Jensen’s alpha significance test and the Huberman and Kandel’ (1987) spanning test, we found that the three benchmarks have a statistically equal performance. By using Bailey’s (1992) risk exposure, market representativeness and turn over benchmark quality criteria, we found that the min variance is preferable for the publicly traded Mexican defined contribution pension funds.

Keywords: Simulation modeling; Min variance portfolio; Pension funds (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:nax:conyad:v:60:y:2015:i:3:p:593-614

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