• Graduate Program
    • Why study Business Data Science?
    • Research Master
    • Admissions
    • Course Registration
    • Facilities
  • Summer School
  • Research
  • News
  • Events
    • Events Calendar
    • Events archive
    • Tinbergen Institute Lectures
    • Summer School
      • Deep Learning
      • Economics of Blockchain and Digital Currencies
      • Foundations of Machine Learning with Applications in Python
      • Machine Learning for Business
      • Marketing Research with Purpose
      • Sustainable Finance
      • Tuition Fees and Payment
      • Tinbergen Institute Summer School Program
    • Annual Tinbergen Institute Conference archive
  • Alumni
  • Magazine

Andonov, A. and Rauh, J. (2022). The Return Expectations of Public Pension Funds Review of Financial Studies, 35(8):3777–3822.

  • Journal
    Review of Financial Studies
View publication

The return expectations of public pension funds are positively related to cross-sectional differences in past performance. This positive relation operates through the expected risk premium, rather than the expected risk-free rate or inflation rate. Pension funds act on their beliefs and adjust their portfolio composition accordingly. Persistent investment skills, risk-taking, efforts to reduce costly rebalancing, and fiscal incentives from unfunded liabilities cannot fully explain the reliance of expectations on past performance. The results are consistent with extrapolative expectations, as the dependence on past returns is greater when executives have personally experienced longer performance histories with the fund.