International Diversification and Labor Income Risk

Carolina Fugazza (), Maela Giofre' () and Giovanna Nicodano

No 67, CeRP Working Papers from Center for Research on Pensions and Welfare Policies, Turin (Italy)

Abstract: Members of an occupational pension plan face the same industry shocks, since membership is based on employment industry. An occupational pension fund may therefore design portfolio composition so as to hedge members’ labour income shocks at the industry level. This paper quantifies differences in optimal equity portfolios across investors belonging to different industry-country pairs. We compare these industry-based portfolios to the one that would be optimal for an investor endowed with the average home-country labor income. Our analysis uncovers remarkable heterogeneity across industries in the three investing countries considered - US, Canada and Italy. These results point to a clear-cut role of occupational pension funds in hedging labour income risk through international equity diversification.

Keywords: optimal portfolio choice; labor income risk; industry-specific human capital; occupational pension funds (search for similar items in EconPapers)
JEL-codes: E44 G11 G15 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2007-10
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.cerp.carloalberto.org/wp-content/uploads/2008/12/wp_67_rev.pdf?f6fa34 (application/pdf)

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:crp:wpaper:67

Access Statistics for this paper

More papers in CeRP Working Papers from Center for Research on Pensions and Welfare Policies, Turin (Italy) Contact information at EDIRC.
Bibliographic data for series maintained by Silvia Maero ().