We introduce a new dynamic trading strategy based on the systematic mispricing of U.S. companies sponsoring Defined Benefit pension plans. This portfolio produces an average return of 1.51% monthly between 1989 and 2004, with a Sharpe Ratio of 0.26. The returns of the strategy are not explained...

As a consequence of the recent bear stock market, the aggregate funding level of defined benefit pension plans has tremendously deteriorated. A relevant issue is whether the market value of the firms sponsoring these plans reflects information about their pension liabilities. In sharp contrast...