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Performance of Spanish pension funds: robust evidence from alternative models

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  • Mercedes Alda
  • Luis Ferruz
  • Liam A. Gallagher

Abstract

This article investigates the performance of Spanish pension funds using a range of linear and nonlinear performance models. As the sample presents characteristics of higher-order moments, traditional performance measures are distorted. We generate alternative performance models which include higher-order risk factors that model skewness and kurtosis; factors that capture nonlinearity inherent in some of the underlying assets used in pension funds. The results suggest that Spanish pension funds exhibit positive market timing and selectivity ability. Moreover, this positive performance is robust to the model used to adjust performance for risk, including the higher-order risk factors. The stronger performing pension funds have a higher exposure to size and book-to-market risk. Also, small-sized funds and funds with less volatility exhibit stronger performance.

Suggested Citation

  • Mercedes Alda & Luis Ferruz & Liam A. Gallagher, 2013. "Performance of Spanish pension funds: robust evidence from alternative models," Applied Financial Economics, Taylor & Francis Journals, vol. 23(4), pages 297-314, February.
    • Handle: RePEc:taf:apfiec:v:23:y:2013:i:4:p:297-314
    DOI: 10.1080/09603107.2012.720011
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    References listed on IDEAS

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    1. Christensen, Michael, 2005. "Danish Mutual Fund Performance - Selectivity, Market Timing and Persistence," Finance Research Group Working Papers F-2005-01, University of Aarhus, Aarhus School of Business, Department of Business Studies.
    2. Im, K.S., 1996. "Least Square Approach to Non-Normal Disturbances," Cambridge Working Papers in Economics 9603, Faculty of Economics, University of Cambridge.
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