This paper examines the ability of balanced pension plan managers to successfully time the equity and bond market and select the appropriate assets within these markets. In order to evaluate both market timing abilities in these balanced pension plans, we extend the traditional equity market timing models to also account for bond market timing. As far as we know, we are among the first to apply this multifactor timing model to investigate equity and bond market timing simultaneously. This performance evaluation has been conducted on two samples of Spanish balanced pension plans, one with Euro Zone and one with World investment focus. This allows us to decompose managers' skills into three components: selectivity, equity market timing, and bond market timing. Our findings suggest that the average stock-picking ability of pension plans is positive. World schemes tend to have positive bond timing skills, while Euro Zone pension plans are on average not able to time equity or bond markets.

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ERIM Article Series (EAS)
Quantitative Finance
Erasmus Research Institute of Management

Andreu, L, & Swinkels, L.A.P. (2012). Performance evaluation of balanced pension plans. Quantitative Finance, 12(5), 819–830. doi:10.1080/14697681003762289