Portable Alphas from Pension Mispricing

Francesco Franzoni and José M. Marín
Authors registered in the RePEc Author Service: Jose M. Marin ()

No 227, Working Papers from Barcelona School of Economics

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: Defined Benefit Plans; Portable Alpha; Enhanced Indexing; Pension Contributions; Pricing Anomaly (search for similar items in EconPapers)
JEL-codes: D8 G11 G12 G14 (search for similar items in EconPapers)
Date: 2015-09
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Related works:
Working Paper: Portable Alphas from Pension Mispricing (2006)
Working Paper: Portable alphas from pension mispricing (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:227

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