Should the Indonesian pension funds invest abroad?
Currently, the Indonesian pension fund is prohibited from investing in international assets. In this paper, I quantitatively investigate the benefit and/or the cost, if any, caused by this constraint. Standard mean-variance techniques will be used along with Monte Carlo simulation to check the robustness of the findings. Under various assumptions, including international assets in the pension fund’s portfolio could potentially aid pension funds to have higher returns and accumulated wealth. Accordingly, the findings suggest possible reform to lessen these restrictions. Given the controversy over international diversification, a reasonable compromise that would help capture many of the potential benefits for risk-averse investors could be to create a ceiling of 20 percent for international assets.
|Date of creation:||19 Sep 2011|
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- Ajantha Kumara & Wade Pfau, 2013.
"Would emerging market pension funds benefit from international diversification: investigating wealth accumulations for pension participants,"
Annals of Finance,
Springer, vol. 9(3), pages 319-335, August.
- Kumara, Ajantha Sisira & Pfau, Wade Donald, 2011. "Would emerging market pension funds benefit from international diversification: investigating wealth accumulations for pension participants," MPRA Paper 31395, University Library of Munich, Germany, revised 10 Jun 2011.
- Lagoarde-Segot, Thomas & Lucey, Brian M., 2007. "International portfolio diversification: Is there a role for the Middle East and North Africa?," Journal of Multinational Financial Management, Elsevier, vol. 17(5), pages 401-416, December.
- Bodie, Zvi & Merton, Robert C., 2002. "International pension swaps," Journal of Pension Economics and Finance, Cambridge University Press, vol. 1(01), pages 77-83, March.
- Wade D. Pfau, 2008. "Emerging Market Pension Funds and International Diversification," GRIPS Discussion Papers 08-10, National Graduate Institute for Policy Studies.
- Pfau, Wade Donald, 2009. "Emerging Market Pension Funds and International Diversification," MPRA Paper 19039, University Library of Munich, Germany.
- 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.
- 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.
- Ajantha Sisira Kumara & Wade Pfau, 2012. "Reforming Pension Funds In Sri Lanka: International Diversification And The Employees' Provident Fund," Australian Economic Papers, Wiley Blackwell, vol. 51(1), pages 23-37, 03.
- Ajantha Sisira Kumara & Wade D. Pfau, 2010. "Reforming Pension Funds in Sri Lanka: International Diversification and the Employees’ Provident Fund," GRIPS Discussion Papers 10-13, National Graduate Institute for Policy Studies.
- Driessen, Joost & Laeven, Luc, 2007. "International portfolio diversification benefits: Cross-country evidence from a local perspective," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1693-1712, June. Full references (including those not matched with items on IDEAS)
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