Asset Allocation Dynamics and Pension Fund Performance

Posted: 11 Feb 2000

See all articles by Allan Timmermann

Allan Timmermann

UCSD ; Centre for Economic Policy Research (CEPR)

Bruce N. Lehmann

University of California, San Diego; National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT)

David P. Blake

City, University of London

Abstract

Using a data set on more than 300 U.K. pension funds' asset holdings, this article provides a systematic investigation of the performance of managed portfolios across multiple asset classes. We find evidence of slow mean reversion in the funds' portfolio weights toward a common, time-varying strategic asset allocation. We also find surprisingly little cross-sectional variation in the average ex post returns arising from the strategic-asset-allocation, market-timing, and security-selection decisions of the fund managers. Strategic asset allocation accounts for most of the time-series variation in portfolio returns, while market timing and asset selection appear to have been far less important.

JEL Classification: G12

Suggested Citation

Timmermann, Allan and Lehmann, Bruce and Blake, David P., Asset Allocation Dynamics and Pension Fund Performance. The Journal of Business, Vol. 72, No. 4, October 1999, Cass Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=171968

Allan Timmermann (Contact Author)

UCSD ( email )

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HOME PAGE: http://rady.ucsd.edu/people/faculty/timmermann/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Bruce Lehmann

University of California, San Diego ( email )

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National Bureau of Economic Research (NBER)

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Massachusetts Institute of Technology (MIT) ( email )

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David P. Blake

City, University of London ( email )

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Great Britain
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+44 (0) 20-7040-8881 (Fax)

HOME PAGE: http://www.pensions-institute.org/

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