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A Cluster Analysis of OECD Pension Funds

Author

Listed:
  • Flavia BARNA

    (Faculty of Economics and Business Administration, West University of Timisoara, Romania)

  • Victoria SEULEAN

    (Faculty of Economics and Business Administration, West University of Timisoara, Romania)

  • Maria Luiza MOS

    (Faculty of Economics and Business Administration, West University of Timisoara, Romania)

Abstract

The investment policy of the voluntary pension funds is crucial in achieving a superior performance as their competitors. The investment duration, the target and the taxpayers’ typology have an impact on the structure of the selected portfolios and the levels of accepted risk. In this context, the international turmoil in the financial markets was an important determinant of the current investment policy of the voluntary pension funds. The purpose of this paper is to divide the pension funds that are active in the OECD countries by risk levels using cluster analysis. This type of analysis divides data into clusters that are meaningful, useful or both. There are numerous ways in which clusters can be formed, the essential criterion of all the procedures being the attempt to maximize the difference between clusters relative to the variation within the cluster. In order to achieve this goal, secondary date was use, provided by the Organisation for Economic Cooperation and Development and covering the 2001-2009 period. The data provide annually information regarding the investments of the pension funds, as a percentage of the GDP and also their structure. The analysis demonstrated that there are mainly two groups, based on the risk profile. Even though the composition of the groups changes along the years due to the changes in the investment strategies of the pension funds, the number of clusters remains the same. The results show that, when selecting and optimizing the financial portfolio, the voluntary pension funds take into account the taxpayers’ risk profile.

Suggested Citation

  • Flavia BARNA & Victoria SEULEAN & Maria Luiza MOS, 2011. "A Cluster Analysis of OECD Pension Funds," Timisoara Journal of Economics, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 4(3(15)), pages 143-148.
    • Handle: RePEc:wun:journl:tje:v04:y2011:i3(15):a02
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    References listed on IDEAS

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    1. Jacob A. Bikker & Dirk W.G.A. Broeders & Dirk Jan de Dreu, 2010. "Stock Market Performance and Pension Fund Investment Policy: Rebalancing, Free Float, or Market Timing?," International Journal of Central Banking, International Journal of Central Banking, vol. 6(2), pages 53-79, June.
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    Cited by:

    1. Vitalija Serapinaitė & Audrius Kabašinskas, 2021. "Clustering of Latvian Pension Funds Using Convolutional Neural Network Extracted Features," Mathematics, MDPI, vol. 9(17), pages 1-45, August.

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    More about this item

    Keywords

    cluster analysis; investment policy; private pensions; risk;
    All these keywords.

    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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