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Pension expenses, risk, and implications for stock returns

Author

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  • Taussig, Roi D.

Abstract

As life expectancy rises, firms' pension expenses for employees rise as well. This study shows that from around the beginning of the current millennium, US firms' annual mean expenditure on their employee pensions has increased substantially. This expense has become a burden on firms and presents a risk for their activity, which is not diversifiable. An increase in the newly suggested measure causes an increase in the average cross-sectional stock returns. This effect is both statistically and economically significant. Moreover, the effect is sustainable for a variety of robustness tests, both in-sample and out-of-sample.

Suggested Citation

  • Taussig, Roi D., 2024. "Pension expenses, risk, and implications for stock returns," Finance Research Letters, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612324000461
    DOI: 10.1016/j.frl.2024.105016
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    More about this item

    Keywords

    Stock return; Pension; Asset pricing; Cross-section returns;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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