KURTBEGU Enareta

Intergenerational risk sharing is often seen as a strong point of the Dutch pension system. The ability to absorb financial and actuarial shocks through the funding ratio allows for the smoothing of returns over generations. Nevertheless, it implicitly means that generations subsidize each other, which has its disadvantages, especially in the light of incomplete contracts and situations of hard regulation constraints. This paper highlights the advantages of intergenerational risk sharing as a main characteristic in certain collective pension plans, investigating if and how much of this can be replicated by individual participation in the market. Using a stylized model based on different pension plans such as “hard”/“soft” defined benefit, collective/“pure” defined contribution, this paper identifies the effects of an increase in life-expectancy as one of the most important actual demographic shocks. The existence of regulatory constraints modifies agents’ behavior so that they tend to choose individual investment to ensure their retirement savings. In the absence of regulatory constraints, individual investment under-performs and highly replicates pension fund performance. Thus, choosing collective participation is more rational. Moreover, as the effect of the shock is decomposed, a discussion of the absorption heterogeneity by different plans is presented.

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Despite significant changes in pension systems, including the shift from pay-as-you-go to funded systems, several problems remain. The demographic structure is one of the main factors of systemic risk, threatening the equilibrium of pension funds and favoring instability and poor economic performance. In this thesis, we mobilize empirical and theoretical analysis to provide an investment strategy response to this problem. We first synthesize the existing literature and highlight the importance of intergenerational risk sharing and the differences between individual and collective investments. Using a nested generation model, we study the effects of demographic structure on asset prices. We identify a positive correlation between the inverse of the dependency ratio and asset prices (asset meltdown). Then, using simulated pension contracts, we study the effects of increasing life expectancy and decreasing fertility rates on intergenerational risk sharing. Although the group defined contribution (DC) pension plan better amortizes demographic risks, similar performance can be achieved through individual funding. Moreover, individual funding outperforms the group plan when regulations are highly restrictive. Our results suggest the need for a continuous reform process based on investment strategies. Thus, the effectiveness of fund selection methods such as the false positive rate method seems to be confirmed.

A new bootstrap technique is applied to analyze the performance of a set of Asian REITs and make selections based on the best performers. The cross-section of Asian REITs being non-normal, these techniques are quite useful. The risk-adjusted performance issued from traditional asset pricing models will be analyzed with bootstrapping tools that will also allow controlling for multiple testing problems usually encountered when analyzing the cross-section of returns. "published in the “Handbook of Asian Finance,” edited by David Lee and Gregoriou,2014.".