The Efficiency of Greek Public Pension Fund Portfolios

40 Pages Posted: 25 Apr 2009  

Timotheos Angelidis

University of Peloponnese - Department of Economics

Nikolaos Tessaromatis

EDHEC Business School

Date Written: April, 24 2009

Abstract

Greek public pension funds can invest up to 23% into risky assets and are not allowed to invest outside Greece. This paper seeks to investigate the costs of investment constraints on pension fund portfolios. In particular we try to quantify the losses that portfolios suffer due to under-diversification and sub-optimal asset allocation. We find that the high concentration of Greek equity portfolios imposes a substantial return and utility loss which is further increased when the lack of international diversification is taken into account. Restricting the weight of equities to 23% of the total portfolio, leads to sub-optimal asset allocation that costs as much as 2% (3%) per annum compared to a balanced domestic (global) benchmark.

Keywords: Portfolio Efficiency, Idiosyncratic Risk, Asset Allocation, Utility Loss, Pension Funds.

JEL Classification: G10, G11, G18, G23

Suggested Citation

Angelidis, Timotheos and Tessaromatis, Nikolaos, The Efficiency of Greek Public Pension Fund Portfolios (April, 24 2009). Available at SSRN: https://ssrn.com/abstract=1394457 or http://dx.doi.org/10.2139/ssrn.1394457

Timotheos Angelidis (Contact Author)

University of Peloponnese - Department of Economics ( email )

Tripolis, 22100
Greece

Nikolaos Tessaromatis

EDHEC Business School ( email )

58 rue du Port
Lille, 59046
France

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