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 it was just in January 2007 that 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 a great deal 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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 19037.
Date of creation: Sep 2009
Date of revision:
Publication status: Published in Economic Issues 2.14(2009): pp. 81-105
pension; asset allocation; financial markets; Asia; Pakistan;
Other versions of this item:
- W Pfau, 2009. "The Role of International Diversification in Public Pension Systems: The Case of Pakistan," Economic Issues Journal Articles, Economic Issues, vol. 14(2), pages 81-106, September.
- 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
This paper has been announced in the following NEP Reports:
- NEP-AGE-2009-12-19 (Economics of Ageing)
- NEP-ALL-2009-12-19 (All new papers)
- NEP-CWA-2009-12-19 (Central & Western Asia)
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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MIMAP Technical Paper Series
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