Abstract
This article analyzes the phenomenon of performance persistence in Spanish equity pension plans between 1999 and 2006 to determine whether plans with higher performance in one period continue obtaining higher performance in the future. It also aims to determine the influence of past performance on investor behavior in order to examine whether money and investor flows of these portfolios are affected by past performance. The results reveal the existence of short-term performance persistence and a statistically significant relationship between historical returns and investment flows.
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Notes
The tax breaks granted to individuals are one of the most important reasons behind this exceptional growth of the industry over the last few years.
The analysis of 4 × 4 contingency tables has not been applied in the first years of the time horizon because of the low number of pension plans in existence. Everitt (1992) mentions the problem arising when expected frequencies are lower than 5.
To split performance persistence results in two subsets according to pension plans size, the median criterion is used.
4 × 4 contingency tables are not applied because the number of pension plans analyzed in these comparisons is not enough to use this methodology.
In this table the years 2000 and 2001 are not studied because only the analysis of the previous year can be applied and these results would be the same than those reported in Table 1.
These results of two consecutive years are not exactly the same than those obtained in Table 1 because now the analysis in each year (2002, 2003, 2004, 2005, and 2006) is carried out considering the pension plans that have been in existence during the previous 5 years. Thus, as can be seen in Table 5, in each year the number of pension plans considered is the same regardless of the consideration of information of the previous year or the previous 3 or 5 years. This fact could induce to some “age bias” due to the inclusion of those pension plans surviving 5 years. However, a complementary study has been worked out to avoid this bias obtaining similar results.
In the case of money flows also the period 2003–2004 shows statistically significance.
For both tables, the analysis of 4 × 4 contingency tables has not been applied in the first years of the time horizon because of the low number of pension plans in existence.
These results are available upon request to the authors.
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Acknowledgements
We would like to thank the Spanish Ministry of Science (MEC) for research project SEJ 2006-04208, co-financed by FEDER funds (European Union, Brussels) and to the University of Zaragoza for the award of projects 268-128; 268-147 and 268-159.
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Ferruz, L., Vicente, L. & Andreu, L. Performance persistence and its influence on money and investor flows into Spanish pension plans. Rev Quant Finan Acc 32, 85–100 (2009). https://doi.org/10.1007/s11156-008-0087-6
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DOI: https://doi.org/10.1007/s11156-008-0087-6