Portable alphas from pension mispricing

Jose Marin () and Francesco Franzoni

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We introduce a new dynamic trading strategy based on the systematic misspricing 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: 2005-10
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Portable Alphas from Pension Mispricing (2015)
Working Paper: Portable Alphas from Pension Mispricing (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:894

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