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Is the Return on Investment of Norwegian Pension Funds a Result of Luck or Managers’ Skills? Is it Possible to Predict Which Pension Funds that Will Outperform the Market?

Gangnes, Elise; Hammarstrøm, Karianne
Master thesis
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URI
http://hdl.handle.net/11250/2578445
Date
2018
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  • Master of Science [1116]
Abstract
The purpose of this research is to get insight into the Norwegian pension fund

market. We will look further into the performance of pension funds by analyzing

the drivers of the return of the funds. The data of study consists of 70 Norwegian

pension funds delivered from Pensjon Norge AS with period from 2014-2017.

In this thesis, we will study whether the performance of the pension funds is a result

of luck or the stock-picking skills of managers by using bootstrap simulations. In

addition, we will investigate the persistence of pension fund performance. Firstly,

we use the four-factor model of Carhart (1997) to compute residuals, factor loadings

and alphas of each pension fund. Further, we bootstrap a new dataset of alphas, and

generate t-statistics of alpha, for each fund which is used to compare with the

original four-factor alphas and t-statistics of alpha. We also compute the parametric

and bootstrapped p-values for each fund to conclude our hypotheses. The main

analysis in this study is over a period of three years (2015-2017). Besides, we also

test three different subperiods as robustness tests. We operate with two different

datasets, one dataset which contains gross numbers while the other dataset is net

numbers.

Our main findings in this analysis are that there is some degree of stock-picking

skills of managers for several pension funds. By evaluating the bootstrapped pvalues,

we can reject the null hypothesis for significant p-values and hence, rule the

return of some funds as a result of managers’ skills. On the contrary, we are not

able to make any conclusions if the bootstrapped p-values are insignificant. In

general, there are indications of some persistence in the performance of the pension

funds. However, we are not able to predict which pension fund that will outperform

the market since the ranking of the funds varies across the percentiles.
Description
Masteroppgave(MSc) in Master of Science in Business, Business law, tax and accounting - Handelshøyskolen BI, 2018
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Handelshøyskolen BI

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