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Quantifying the costs of investment limits for Chilean pension funds

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  • Solange M. Berstein
  • Rómulo A. Chumacero

Abstract

Since the creation of the Chilean pension fund industry in 1981, pension fund administrators have not been free to choose their investment portfolios because of stringent regulation of investment limits. The diagnosis implicit with the imposition of limits was that the Chilean capital market was not deep, that there was an important demand for funds to finance the expansion of the productive sector and that, due to principal-agent problems, protection for uninformed account holders was needed. As this regulation entails an inefficient combination of risk and return, this paper quantifies its costs.

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Bibliographic Info

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 27 (2006)
Issue (Month): 1 (March)
Pages: 99-123

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Handle: RePEc:ifs:fistud:v:27:y:2006:i:1:p:99-123

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References

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  1. Eduardo Walker, 1993. "Desempeño Financiero de las Carteras de Renta Fija de los Fondos de Pensiones en Chile. ¿Ha Tenido Desventajas Ser Grandes?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 30(89), pages 1-34.
  2. Gourieroux, C. & Laurent, J. P. & Scaillet, O., 2000. "Sensitivity analysis of Values at Risk," Journal of Empirical Finance, Elsevier, vol. 7(3-4), pages 225-245, November.
  3. LeRoy,Stephen F. & Werner,Jan, 2001. "Principles of Financial Economics," Cambridge Books, Cambridge University Press, number 9780521586054, April.
  4. Tsong-Yue Lai & Ko Wang & Su Han Chan & Daniel C. Lee, 1992. "A Note on Optimal Portfolio Selection and Diversification Benefits with a Short Sale Restriction on Real Estate Assets," Journal of Real Estate Research, American Real Estate Society, vol. 7(4), pages 493-501.
  5. Eduardo Walker, 1993. "Desempeño Financiero de las Carteras Accionarias de los Fondos de Pensiones en Chile ¿Ha Tenido Desventajas ser Grandes?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 30(89), pages 35-76.
  6. Christian A.Johnson, 2001. "Value at risk: teoría y aplicaciones," Estudios de Economia, University of Chile, Department of Economics, vol. 28(2 Year 20), pages 217-247, December.
  7. Christian Gourieroux & Jean-Paul Laurent & Olivier Scaillet, 2000. "Sensitivity Analysis of Values at Risk," Working Papers 2000-05, Centre de Recherche en Economie et Statistique.
  8. Christian A. Johnson, 2002. "Value at Risk: Teoría y Aplicaciones," Working Papers Central Bank of Chile 136, Central Bank of Chile.
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Citations

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Cited by:
  1. Raddatz, Claudio & Schmukler, Sergio L., 2011. "Deconstructing herding : evidence from pension fund investment behavior," Policy Research Working Paper Series 5700, The World Bank.
  2. Diego Jara & Carolina Gómez & Andrés Pardo, 2005. "Análisis de eficiencia de los portafolios pensionales obligatorios en Colombia," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  3. Raddatz, Claudio & Schmukler, Sergio L., 2008. "Pension Funds And Capital Market Development:How Much Bang For The Buck?," Policy Research Working Paper Series 4787, The World Bank.
  4. Berstein, Solange & Chumacero, Rómulo, 2010. "VaR Limits for Pension Funds: An Evaluation," MPRA Paper 22574, University Library of Munich, Germany.
  5. Greg Brunner & Richard Hinz & Roberto Rocha, 2008. "Risk-based Supervision of Pension Funds : Emerging Practices and Challenges," World Bank Publications, The World Bank, number 6419, October.

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