Pension Funds’ Asset Allocation and Participant Age: A Test of the Life‐Cycle Model

24 Pages Posted: 23 Aug 2012

See all articles by Jacob Antoon Bikker

Jacob Antoon Bikker

De Nederlandsche Bank; Utrecht University - School of Economics

Dirk Broeders

De Nederlandsche Bank; Maastricht University

David Hollanders

Tilburg University - Tilburg University School of Economics and Management

Eduard H.M. Ponds

Algemene Pensioen Groep (APG); Tilburg University - Department of Economics; Netspar; Tilburg University - Center for Economic Research (CentER)

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Date Written: September 2012

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.

Suggested Citation

Bikker, Jacob Antoon and Broeders, Dirk and Hollanders, David and Ponds, Eduard H.M., Pension Funds’ Asset Allocation and Participant Age: A Test of the Life‐Cycle Model (September 2012). Journal of Risk and Insurance, Vol. 79, Issue 3, pp. 595-618, 2012. Available at SSRN: https://ssrn.com/abstract=2134736 or http://dx.doi.org/10.1111/j.1539-6975.2011.01435.x

Jacob Antoon Bikker (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
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Utrecht University - School of Economics ( email )

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Dirk Broeders

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

HOME PAGE: http://www.dnb.nl/en/onderzoek-2/onderzoekers/overzicht-persoonlijke-paginas/dnb257487.jsp

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

HOME PAGE: http://https://www.maastrichtuniversity.nl/about-um/faculties/school-business-and-economics

David Hollanders

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Eduard H.M. Ponds

Algemene Pensioen Groep (APG) ( email )

P.O. Box 75283
Amsterdam, 1070 AG
Netherlands

Tilburg University - Department of Economics

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg University - Center for Economic Research (CentER) ( email )

Tilburg

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