March 2017

17Mar

Life-Cycle Consumption, Investment, and Voluntary Retirement with Cointegration between the Stock and Labor Markets

By Min Dai, Shan Huang & Seyoung Park (National University of Singapore) We present an optimal life-cycle consumption, investment, and voluntary retirement model for a borrowing and short sale constrained investor who faces cointegration between the stock and labor markets. With reasonable parameter values, there exists a target wealth-to-income ratio under which the investor does not participate in the stock market at all, whereas above which the investor increases the proportion of financial wealth invested in the stock market as...

March 17, 2017
Articles, Investing, Labor Market, Pension design, ,
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February 2017

04Feb

Why Do Firms Offer Risky Defined Benefit Pension Plans?

By David A. Love, Paul A. Smith, & David Wilcox Even risky pension sponsors could offer essentially riskless pension promises by contributing a sufficient level of resources to their pension trust funds and by investing those resources in fixed-income securities designed to deliver their payoffs just as pension obligations are coming due. However, almost no firm has chosen to fund its plan in this manner. We study the optimal funding choice for plan sponsors by developing a simple model of...

February 4, 2017
Articles, Corporate Governance, Investing,
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04Feb

Should Risky Firms Offer Risk-Free DB Pensions?

By David A. Love, Paul A. Smith, & David Wilcox We develop a simple model of pension financing to study the effects of pension risk on shareholder value. In the model, firms minimize costs, total compensation must clear the labor market, and a government pension insurer guarantees a portion of promised benefits. We find that in the absence of mispriced pension insurance, the optimal pension strategy under most specifications is to immunize all sources of market risk. Mispriced pension insurance,...

February 4, 2017
Articles, Corporate Governance, Investing,
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04Feb

Finance and Labor: Perspectives on Risk, Inequality and Democracy

By Sanford M. Jacoby This paper considers the association between financial development and labor-market outcomes such as risk and inequality. The relationship is not straightforward, however. It is mediated by politics at the national and corporate levels. Politics spurs financial development, which sets in motion countervailing efforts to restrain the effect of finance on inequality and risk. The empirical analysis relies on historical, comparative, and contemporary evidence. Emphasis is given to recent events in the United States: the political origins...

February 4, 2017
Articles, Labor Market, Regulation, System Sustainability, , ,
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04Feb

Regulation and Supervision of Pension Funds in India

By S. P. Subedar Power Point Presentation. Occupational pension funds need to be regulated and supervised. A statutory role in the form of Scheme Actuary needs to be created for DB pensions.Adequate information need to be provided annually to the DC pension subscribers about the likely accumulation and pension pay out on their retirement. These measures would ensure that all pension issues are addressed in a holistic manner and cohesiveness is brought in regulation and supervision of pension business. (more…)

February 4, 2017
Articles, Regulation, Supervision, , ,
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04Feb

Pension Fund Reform and European Financial Markets

By E. Phillip Davis Pension reform is widely seen as essential in order to defuse the difficulties EU governments would otherwise face in respect of their social security pension systems in a context of population ageing. Particularly when such reform involves funding of future pensions, it may have radical implications for European financial markets, entailing important changes in the demand for financial assets by the private sector and qualitative developments in capital markets and banking which may impinge on banks...

February 4, 2017
Articles, Investing, Regulation,
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04Feb

New Architectures in the Regulation and Supervision of Financial Markets and Institutions: The Netherlands

By Henriëtte Prast & Iman Van Lelyveld In recent years, several European Union member states have modified the institutional design offinancial supervision. These reforms pose the question which considerations have led to the different models chosen in these countries. We analyse the considerations in the Netherlands leading to the choice in 2002 of the twin -peaks model of financial supervision. The new model is based on the objectives of supervision. Thus, a separate authority is responsible for conduct-ofbusiness supervision, whereas...

February 4, 2017
Articles, Regulation, Supervision, ,
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04Feb

Changes in Funding Patterns by Latin American Banking Systems: How Large? How Risky? – Working Paper 420

By Liliana Rojas-Suarez & José María Serena This paper investigates the shifts in Latin American banks’ funding patterns in the post-global financial crisis period. To this end, we introduce a new measure of exposure of local banking systems to international debt markets that we term: International Debt Issuances by Locally Supervised Institutions. In contrast to well-known BIS measures, our new metric includes all entities that fall under the supervisory purview of the local authority. This is especially important in Latin...

February 4, 2017
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04Feb

Do a Firm’s Equity Returns Reflect the Risk of Its Pension Plan?

By Zvi Bodie, Robert C. Merton & Li Jin This paper examines the empirical question of whether systematic equity risk of US firms as measured by beta from the capital asset pricing model reflects the risk of their pension plans. There are a number of reasons to suspect that it might not. Chief among them is the opaque set of accounting rules used to report pension assets, liabilities, and expenses. Pension plan assets and liabilities are off-balance sheet and are often...

February 4, 2017
Articles, Corporate Governance, Investing,
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04Feb

Do a Firm's Equity Returns Reflect the Risk of Its Pension Plan?

By Zvi Bodie, Robert C. Merton & Li Jin This paper examines the empirical question of whether systematic equity risk of US firms as measured by beta from the capital asset pricing model reflects the risk of their pension plans. There are a number of reasons to suspect that it might not. Chief among them is the opaque set of accounting rules used to report pension assets, liabilities, and expenses. Pension plan assets and liabilities are off-balance sheet and are often...

February 4, 2017
Articles, Corporate Governance, Investing,
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