Efficiency of the Public Pensions Funds on the Socially Responsible Equities of Mexico

Oscar V. De la Torre-Torres, Evaristo Galeana-Figueroa and José Álvarez-García
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Oscar V. De la Torre-Torres: Faculty of Accounting and Management, Michoacán State University of Saint Nicholas and Hidalgo (UMSNH), Morelia 58030, Mexico
Evaristo Galeana-Figueroa: Faculty of Accounting and Management, Michoacán State University of Saint Nicholas and Hidalgo (UMSNH), Morelia 58030, Mexico
José Álvarez-García: Financial Economy and Accounting Department, Faculty of Business, Finance and Tourism, University of Extremadura, 10071 Cáceres, Spain
Authors registered in the RePEc Author Service: Oscar Valdemar De la Torre Torres ()

Sustainability, 2018, vol. 11, issue 1, 1-18

Abstract: In the present work, we test the mean-variance efficiency that Mexican public pension funds would have shown had these invested their local equity portfolio component only in socially responsible stocks. With a daily simulation (from 1 January 2005 to 31 July 2018) of the Standard & Poors (S&P) Mexico target risk indices, we found that there was no significant difference between the more conservative pension funds that invested only in the Price Index and Quotations (IPC) sustainable index against the ones that invested in the conventional IPC. In the case of the more aggressive type of pension funds (those with a higher Mexican equity investment level), a lower mean-variance efficiency would have been observed had these invested in the IPC sustainable index. We also found, with a two-regime Markov-switching analysis, that socially responsible investment would have been better for most of these pension funds during distress time periods. Even if our results do not give strong short-term proof for the use of a socially responsible investment strategy in the most aggressive pension funds, we found that the benefits will be observed in the long-term, due to a better performance during distress time periods and the lag effect of mid and small-cap stocks in the performance.

Keywords: pension funds; socially responsible investment; asset-allocation; Markov-switching models; portfolio back test and simulation; SIEFORE (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:11:y:2018:i:1:p:178-:d:194176

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