Asset pricing and risk sharing implications of alternative pension plan systems
Author(s)
Coimbra, Nuno
Gomes, Francisco
Michaelides, Alexandros
Shen, Jialu
Type
Journal Article
Abstract
We show that incorporating defined benefit pension funds in an incomplete markets asset pricing model improves its ability to match the historical equity premium and riskless rate and has important risk sharing implications. We document the importance of the pension fund’s size and asset demands, and a new risk channel arising from fluctuations in the fund’s returns. We use our calibrated model to study the implications of a shift to an economy with defined contribution plans. The new steady-state is characterized by a higher riskless rate and a lower equity premium. Consumption volatility increases for retirees but decreases for workers.
Date Issued
2026-02-01
Date Acceptance
2025-03-11
Citation
The Journal of Finance, 2026, 81 (1), pp.143-188
ISSN
0022-1082
Publisher
Wiley
Start Page
143
End Page
188
Journal / Book Title
The Journal of Finance
Volume
81
Issue
1
Copyright Statement
© 2025 The Author(s). The Journal of Finance published by Wiley Periodicals LLC on behalf of American Finance Association. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
License URL
Identifier
10.1111/jofi.13507
Publication Status
Published
Date Publish Online
2025-10-07