The expected rate of return on pension funds and asset allocation as predictors of portfolio performance

Eli Amir, Shlomo Benartzi

Research output: Contribution to journalArticlepeer-review

Abstract

We examine the correlation between the expected rate of return on pension assets (ERR), as reported in the financial statements, and the composition of the pension portfolio, measured as the percent invested in equities (% Equity). Our evidence indicates that ERR and %Equity are related, but the relation is rather weak. We also examine whether ERR and %Equity are correlated with future returns on pension assets. Only %Equity is correlated with future pension returns. Our results suggest that the FASB should consider the enforcement rather than elimination of current disclosure requirements regarding pension asset composition.

Original languageEnglish
Pages (from-to)335-352
Number of pages18
JournalAccounting Review
Volume73
Issue number3
StatePublished - Jul 1998

Keywords

  • Actuarial assumptions
  • Expected rate of return on pensions
  • Pension accounting
  • Pension asset allocation

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