Background Risk and University Endowment Funds

Stephen Dimmock

The Review of Economics and Statistics, 2012, vol. 94, issue 3, 789-799

Abstract: This paper tests the effect of background risk on university endowment portfolios, where background risk is defined as the volatility of universities' nonfinancial income. The results show that higher background risk is associated with lower portfolio standard deviations. Universities with higher background risk invest significantly more in fixed income and less in alternative assets. A 1 standard deviation increase in background risk increases the allocation to fixed income by approximately 15% relative to the mean. There is also evidence that wealthier, highly selective universities hold riskier portfolios. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Keywords: university endowment funds; background risk; asset allocation; portfolio choice; incomplete markets (search for similar items in EconPapers)
JEL-codes: D52 G11 I22 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (31)

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00180 link to full text PDF (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:94:y:2012:i:3:p:789-799

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().