Pension funds’ asset allocation and participant age

A test of the life-cycle model

J.A. Bikker, D.W.G.A. Broeders, D.A. Hollanders, E.H.M. Ponds

Research output: Contribution to journalArticleScientificpeer-review

Abstract

This article examines the impact of participants’ age distribution on the asset allocation of Dutch pension funds, using a unique data set of pension fund investment plans for 2007. Theory predicts a negative effect of age on (strategic) equity exposures. We observe that a 1-year higher average age in active participants leads to a significant and robust reduction of the strategic equity exposure by around 0.5 percentage point. Larger pension funds show a stronger age-equity exposure effect. The average age of active participants influences investment behavior more strongly than the average age of all participants, which is plausible as retirees no longer possess any human capital.
Original languageEnglish
Pages (from-to)595-618
JournalJournal of Risk and Insurance
Volume79
Issue number3
DOIs
Publication statusPublished - 2012

Fingerprint

Life-cycle model
Asset allocation
Pension funds
Equity
Investment behavior
Human capital

Cite this

Bikker, J.A. ; Broeders, D.W.G.A. ; Hollanders, D.A. ; Ponds, E.H.M. / Pension funds’ asset allocation and participant age : A test of the life-cycle model. In: Journal of Risk and Insurance. 2012 ; Vol. 79, No. 3. pp. 595-618.
@article{b31147a712ac4ff4a119306cab31292e,
title = "Pension funds’ asset allocation and participant age: A test of the life-cycle model",
abstract = "This article examines the impact of participants’ age distribution on the asset allocation of Dutch pension funds, using a unique data set of pension fund investment plans for 2007. Theory predicts a negative effect of age on (strategic) equity exposures. We observe that a 1-year higher average age in active participants leads to a significant and robust reduction of the strategic equity exposure by around 0.5 percentage point. Larger pension funds show a stronger age-equity exposure effect. The average age of active participants influences investment behavior more strongly than the average age of all participants, which is plausible as retirees no longer possess any human capital.",
author = "J.A. Bikker and D.W.G.A. Broeders and D.A. Hollanders and E.H.M. Ponds",
year = "2012",
doi = "10.1111/j.1539-6975.2011.01435.x",
language = "English",
volume = "79",
pages = "595--618",
journal = "Journal of Risk and Insurance",
issn = "0022-4367",
publisher = "Wiley-Blackwell",
number = "3",

}

Pension funds’ asset allocation and participant age : A test of the life-cycle model. / Bikker, J.A.; Broeders, D.W.G.A.; Hollanders, D.A.; Ponds, E.H.M.

In: Journal of Risk and Insurance, Vol. 79, No. 3, 2012, p. 595-618.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Pension funds’ asset allocation and participant age

T2 - A test of the life-cycle model

AU - Bikker, J.A.

AU - Broeders, D.W.G.A.

AU - Hollanders, D.A.

AU - Ponds, E.H.M.

PY - 2012

Y1 - 2012

N2 - This article examines the impact of participants’ age distribution on the asset allocation of Dutch pension funds, using a unique data set of pension fund investment plans for 2007. Theory predicts a negative effect of age on (strategic) equity exposures. We observe that a 1-year higher average age in active participants leads to a significant and robust reduction of the strategic equity exposure by around 0.5 percentage point. Larger pension funds show a stronger age-equity exposure effect. The average age of active participants influences investment behavior more strongly than the average age of all participants, which is plausible as retirees no longer possess any human capital.

AB - This article examines the impact of participants’ age distribution on the asset allocation of Dutch pension funds, using a unique data set of pension fund investment plans for 2007. Theory predicts a negative effect of age on (strategic) equity exposures. We observe that a 1-year higher average age in active participants leads to a significant and robust reduction of the strategic equity exposure by around 0.5 percentage point. Larger pension funds show a stronger age-equity exposure effect. The average age of active participants influences investment behavior more strongly than the average age of all participants, which is plausible as retirees no longer possess any human capital.

U2 - 10.1111/j.1539-6975.2011.01435.x

DO - 10.1111/j.1539-6975.2011.01435.x

M3 - Article

VL - 79

SP - 595

EP - 618

JO - Journal of Risk and Insurance

JF - Journal of Risk and Insurance

SN - 0022-4367

IS - 3

ER -