Abstract
In the present chapter, we measure the performance of the four types of SIEFOREs and their corresponding performance indices in a two-regime scenario. With the use of Markov-switching models, we found that the historical prices and performance of the SIEFOREs can be modeled with a two-regime geometric Brownian motion stochastic process, and we found that the conventional net-return index measured by CONSAR (the official authority in the pension system) is not sufficient for informational purposes. With our tests, we found that the good performers are not that good in crisis time periods, given the risk exposure with their management. Also, we found that some middle-table performers are the best in a two-regime scenario. With our results, we proved that it is preferable to measure performance in a two-regime scenario in order to increase informational efficiency among pension savers.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
The acronym of Sociedad de Inversión Especializada en Fondos para el Retiro or retirement mutual fund.
- 2.
Just to name a few of these cases.
- 3.
Type 3 (SB3) are SIEFOREs for people that are 37 and 46 years old and type 4 (SB4) for people between 46 and 60.
- 4.
For the sake of simplicity and setting aside the definition of “crisis” in Macroeconomics and Economic Theory (an issue that is not exempt of controversies) we will define a financial distress, bad-performing or crisis time period as that time in which the level of price fluctuation is wider and negative than more stable periods. A definition that is consistent with times such as the 2007–2008 financial crisis and 2011–2012 European debt crises time periods.
- 5.
Given the mean 28-day CETES as the risk-free asset or rf.
- 6.
Sociedad de Inversión Especializada en FOndos para el REtiro or pension savings mutual fund.
- 7.
Comisión Nacional del Sistema de Ahorro para el Retiro or National Pension Savings Commission.
- 8.
Type 1, or SB1, is the most conservative and type 4, or SB4, is the most aggressive with higher investment limits in equities, international securities and commodities.
References
Akaike, H. (1974). A new look at the statistical model identification. IEEE Transactions on Automatic Control, 19, 716–723. https://doi.org/10.1016/J.CUB.2017.09.001.
Albo, A., González, F., Hernández, O., et al. (2007). Hacia el fortalecimiento de los sistemas de pensiones en México. BBVA-Research. http://www.bbvaresearch.com/KETD/fbin/mult/Haciaelfortalecimientodelossistemasdepensionesenmex_tcm346-189743.pdf?ts=1642013. Accessed 3 Feb 2012.
Alexander, C., & Kaeck, A. (2007). Regime dependent determinants of credit default swap spreads. Journal of Banking & Finance, 32, 1008–1021. https://doi.org/10.1016/j.jbankfin.2007.08.002.
Alexander, C., & Lazar, E. (2008). Markov Switching GARCH Diffusion (No. 44). ICMA Centre Discussion Papers in Finance 2008-01 (Vol. 44). Reading. Retrieved from https://www.researchgate.net/profile/Carol_Alexander/publication/46455390_Markov_Switching_GARCH_Diffusion/links/0f31752ff4a9e86a7c000000/Markov-Switching-GARCH-Diffusion.pdf.
Bodie, Z., Merton, R. C., & Samuelson, W. F. (1992). Labor supply flexibility and portfolio choice in a life cycle model. Journal of Economic Dynamics and Control, 16, 427–449.
Brooks, C., & Persand, G. (2001). The trading profitability of forecasts of the gilt–equity yield ratio. International Journal of Forecasting, 17, 11–29.
Calderón-Colín, R., Domínguez, E. E., & Schwartz, M. J. (2009). Consumer confusion: The choice of pension fund manager in Mexico. Journal of Pension Economics & Finance, 9, 43–74. https://doi.org/10.1017/S1474747209004004.
Chan-Lau, J. (2005). Pension funds in latinamerica. Financial Markets, Institutions & Instruments, 14, 107–134.
CONSAR. (2017). Investment regime updated at 2017. In: Financial data. http://www.consar.gob.mx/gobmx/Aplicativo/Limites_Inversion/?lang=en. Accessed 3 September 2018.
CONSAR. (2018). SIEFORES historical prices. In: Financial info. https://www.consar.gob.mx/principal/siefores%7B_%7Dbasicas/precios%7B_%7Dde%7B_%7Dbolsa%7B_%7Dde%7B_%7Dlas%7B_%7Dsiefores.xls%7B&%7Dsa=U%7B&%7Dved=0ahUKEwicpuOwpMDJAhWBGx4KHUBzA7o4ChAWCBcwCQ%7B&%7Dclient=internal-uds-cse%7B&%7Dusg=AFQjCNHxFAXKqu5OAd06A1jF. Accessed 23 August 2018.
De la Torre Torres, O. V., Galeana, E., & Aguilasocho, D. (2015a). An actual position benchmark for Mexican pension funds performance. Economía: teoría y práctica, 43, 133–154.
De la Torre Torres, O. V., Galeana, E., Martínez Torre-Enciso, M. I., & Aguilasocho, D. (2015b). A minimum variance benchmark to measure the performance of pension funds in Mexico. Contaduría y Administración, 60, 593–614. https://doi.org/10.1016/j.cya.2015.05.009.
De la Torre Torres, O. V., Galeana Figueroa, E., & Alvarez-García, J. (2017). The cost of homogeneity in life cycle pension funds: An explanation to demand’s inelasticity of Mexican pension funds with a performance attribution test. European Research on Management and Business Economics, 24, 97–103. https://doir.org/10.1016/j.iedeen.2017.11.002.
Hamilton, J. D. (1989). A new approach to the economic analysis of nonstationary time series and the business cycle. Econometrica, 57, 357–384.
Hamilton, J. D. (1990). Analysis of time series subject to changes in regime. Journal of Econometrics, 45, 39–70. https://doi.org/10.1016/0304-4076(90)90093-9.
Hamilton, J. D. (1994). Time series analysis. Princeton: Princeton University Press.
Hamilton, J. D. (1996). Specification testing in Markov-switching time-series models. Journal of Econometrics, 70, 127–157. https://doi.org/10.1016/0304-4076(69)41686-9.
Hannan, E. J., & Quinn, B. G. (1979). The determination of the order of an autoregression. Journal of the Royal Statistical Society, Series B, 41, 190–195. https://doi.org/10.2307/2985032.
Hauptmann, J., Hoppenkamps, A., Min, A., et al. (2014). Forecasting market turbulence using regime-switching models. Financial Markets and Portfolio Management, 28, 139–164. https://doi.org/10.1007/s11408-014-0226-0.
Martínez, M. R., & Venegas, F. (2014). Análisis del riesgo de mercado de los fondos de pensión en México un enfoque con modelos autorregresivos. Contaduría y Administración, 59, 165–195. https://doi.org/10.1016/S0186-1042(14)71269-0.
Merton, R. (1969). Lifetime portfolio selection under uncertainty: The continuous time case. The Review of Economics and Statistics, 51, 247–257. https://doi.org/10.2307/1926560.
Rodriguez-Reyes, L. (2017). El manejo del riesgo de longevidad en los sistemas públicos de pensiones. Una propuesta de uso de swaps de longevidad para México. El Trimestre Económico, LXXXIV, 681–706.
Santillán, R., Martínez, M., & López, F. (2016). Análisis econométrico del riesgo y rendimiento de las SIEFORES. Revista Mexicana de Economía y finanzas, 11, 29–54.
Schwarz, G. (1978). Estimating the dimension of a model. The Annals of Statistics, 6, 461–464.
Sharpe, W. (1966). Mutual fund performance. Journal of Business, 39, 119–118.
Thomas, A., & Spataro, L. (2016). The effects of pension funds on markets performance: A review. Journal of Economic Surveys, 30, 1–33. https://doi.org/10.1111/joes.12085.
Villagomez, F. A. (2014). El ahorro para el retiro: Una reflexión para México. El Trimestre Económico, 81, 549–576.
Villagómez, F. A., & Hernández, I. (2009). Impacto de la reforma al sistema de pensiones en México sobre el ahorro. Economía Mexicana Nueva Época, XIX, 271–310.
Villagómez, F. A., & Ramírez, G. D. (2014). Pensión universal proporcional. Una propuesta para México. El Trimestre Económico, LXXXI, 839.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2020 Springer Nature Switzerland AG
About this chapter
Cite this chapter
De la Torre-Torres, O.V., Galeana-Figueroa, E., Aguilasocho-Montoya, D. (2020). A Two-Regime Performance Test of the Mexican Public Pension Funds (SIEFOREs). In: Peris-Ortiz, M., Álvarez-García, J., Domínguez-Fabián, I., Devolder, P. (eds) Economic Challenges of Pension Systems. Springer, Cham. https://doi.org/10.1007/978-3-030-37912-4_17
Download citation
DOI: https://doi.org/10.1007/978-3-030-37912-4_17
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-37911-7
Online ISBN: 978-3-030-37912-4
eBook Packages: Economics and FinanceEconomics and Finance (R0)