The Role of International Diversification in Public Pension Systems: The Case of Pakistan
AbstractPakistan's pension system is in the process of increasing funding in anticipation of providing for a growing elderly population. The pension assets are mainly invested domestically, as only in January 2007 were regulations changed to allow the purchase of international assets. In this paper, we quantify how diversification of the pension funds to include world financial assets could help in improving the sustainability of Pakistan pensions, by simultaneously increasing expected returns and decreasing volatility. These arguments are made using historical data, and the robustness of our findings is demonstrated using a large variety of alternative assumptions about future asset returns, risks, and correlations. We find that international diversification could dramatically help to create sustainability for Pakistan's main public pension system available to private workers.
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Bibliographic InfoArticle provided by Economic Issues in its journal Economic Issues.
Volume (Year): 14 (2009)
Issue (Month): 2 (September)
Other versions of this item:
- Pfau, Wade Donald, 2009. "The Role of International Diversification in Public Pension Systems: The Case of Pakistan," MPRA Paper 19037, University Library of Munich, Germany.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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38082, University Library of Munich, Germany.
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- Fahad Rehman, 2010. "Asset Allocation for Government Pension Funds in Pakistan: A Case for International Diversification," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(1), pages 127-151, Jan-Jun.
- Khasanbaev, Alisher & Pfau, Wade Donald, 2009. "The Funded Pension Scheme in Uzbekistan: An Analysis," MPRA Paper 19035, University Library of Munich, Germany.
- Kariastanto, Bayu, 2011. "Should the Indonesian pension funds invest abroad?," MPRA Paper 33581, University Library of Munich, Germany.
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