Determinants of Expected Returns at Public Defined-Benefit Pension Plans
Raj Aggarwal () and
No 1508, Working Papers (Old Series) from Federal Reserve Bank of Cleveland
Estimated expected returns are important for pension plans, as they influence many plan characteristics including required asset levels, annual contributions, and the extent of plan under- or overfunding. Yet, there seems to be little prior literature on the factors influencing these estimated future returns. In an attempt to fill this gap, this paper presents the results of a panel analysis of data on the determinants of such returns used by US public defined-benefit (DB) pension plans for the period 2001–2011. As expected, we find that real return estimates by DB public pension funds are positively related to fund size, fund age, international asset diversification, state income, and corruption levels. However, more interestingly and importantly, we document that real return estimates by public US DB pension funds are positively related to cultural measures of individualism and masculinity, and negatively related to uncertainty avoidance. These results should be of much interest not only to scholars and pension benefi ciaries, but also to fund managers, other capital market participants, and policymakers.
Keywords: public pensions; defined benefit pensions; estimated returns; public policy; pension underfunding; finance and culture (search for similar items in EconPapers)
JEL-codes: H3 H4 H6 I00 J3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age and nep-lma
References: Add references at CitEc
Citations Track citations by RSS feed
Downloads: (external link)
https://www.clevelandfed.org/~/media/content/newsr ... lans%20pdf.pdf?la=en Full text (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:1508
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Working Papers (Old Series) from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().