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This paper addresses the issue of how an investor concerned about the real rate of return on his investment portfolio should allocate his funds among four major asset classes: stocks, bonds, bills and commodity futures contracts. It employs the Markowitz mean-variance framework to derive...
Persistent link: https://www.econbiz.de/10012478417
This paper is organized as follows: The first part of the paper introduces the topic. In the next part, we explore the inadequacies of conventional and equity-based variable annuities in an inflationary environment by contrasting them with a hypothetical PPA. We then try to assess the...
Persistent link: https://www.econbiz.de/10012478703
This paper investigates the effect of inflation uncertainty on the portfolio behavior of households and the equilibrium structure of capitol market rates. The principal findings regarding portfolio behavior are: (1.) In the presence of inflation uncertainty, households will have an...
Persistent link: https://www.econbiz.de/10012478775
Pension funds have played a critical role in the evolution of the markets for debt and equity securities and their derivatives in the U.S. over the last 15 years. The new securities and markets can largely be explained as responses to the investment demands of pension funds in an environment of...
Persistent link: https://www.econbiz.de/10012475944
A contract to insure $1 against inflation is equivalent to a European call option on the consumer price index. When there is no deductible this call option is equivalent to a forward contract on the CPI. Its price is the difference between the prices of a zero coupon real bond and a zero coupon...
Persistent link: https://www.econbiz.de/10012476039
This paper develops the view that employer-sponsored pension plans are best understood as retirement income insurance for employees and from that perspective addresses a number of questions regarding the reasons for their existence, their design, and their funding and investment policies. The...
Persistent link: https://www.econbiz.de/10012476136
The recent introduction of CPI-linked bonds by several financial institutions is a milestone in the history of the U.S. financial system. It has potentially far-reaching effects on individual and institutional asset allocation decisions because these securities represent the only true long-run...
Persistent link: https://www.econbiz.de/10012476264
The purpose of this paper is to survey what is known about the investment policy of pension funds. Pension fund investment policy depends critically on the type of plan: defined contribution versus defined benefit. For defined contribution plans investment policy is not much different than it is...
Persistent link: https://www.econbiz.de/10012476308
Defined Benefit and Defined Contribution plans have significantly different characteristics with respect to the risks faced by employers and employees, the sensitivity of benefits to inflation, the flexibility of funding, and the importance of governmental supervision. In this paper, we examine...
Persistent link: https://www.econbiz.de/10012477360
The manifest purposes of integrating an employer-provided pension plan with social security are:(1) to ensure retirement income adequacy for all covered employees; and (2) to ensure retirement income equity, defined as equal total replacement rates for all employees regardless of salary level....
Persistent link: https://www.econbiz.de/10012477720