Inflation Hedging in Defined Contribution Pension plan by Investing in Tehran Stock-Exchange

Zobeiri, Hoda; Motameni, Mani

doi:10.29252/jemr.10.40.67

Volume 11, Issue 40 (6-2020) jemr 2020, 11(40): 67-98 | Back to browse issues page

‎ 10.29252/jemr.10.40.67

‎ 20.1001.1.22286454.1399.10.40.1.0

Mendeley

Zotero

RefWorks

Zobeiri H, Motameni M. Inflation Hedging in Defined Contribution Pension plan by Investing in Tehran Stock-Exchange. jemr 2020; 11 (40) :67-98
URL: http://jemr.khu.ac.ir/article-1-1862-en.html

Inflation Hedging in Defined Contribution Pension plan by Investing in Tehran Stock-Exchange

Hoda Zobeiri ^*

¹, Mani Motameni²

1- University of Mazandaran , hoda.zobeiri@gmail.com
2- University of Mazandaran

Abstract: (4329 Views)

Due to pension fund problems in Iran, the multi-pillar social insurance system has been released in 2017. According to this, the first pillar is regarding to low income groups and finance through the public fund. The second pillar is defined benefit and finance pay as you go. The third pillar is defined contribution and fully funded finance. Contributions are transferred to the individual account. The pension fund directors supposed to investments the accounts and to return the Contribution fund and its returns in retirement time. The main issue is that the old age pensions are not guaranteed in this plan and face with financial risk and inflation. Due to high inflation of Iran’s economy, the main challenge of third pillar plan is the inflation. This paper is main to inflation hedging in defined contribution pension plan by Investing in Tehran Stock-Exchange. By using NARDL model and 133 monthly data up to 2020 the results show that TSE index can hedge the inflation.

Keywords: Pension Fund, Iran, Stock-Exchange, Inflation

Full-Text [PDF 1732 kb] (2100 Downloads)

Type of Study: Applicable | Subject: سایر
Received: 2019/09/20 | Accepted: 2020/07/1 | Published: 2020/09/22

References

1. Attarioan, E. (2011). Challenges Facing the National Pension Fund and the Strategies to Overcome the Challenge. Ministry of Welfare & Social Security. (In Persian)

2. Arnold, S. and Auer, B. (2015). What do scientists know about inflation hedging? The North American Journal of Economics and Finance, 34, 187-214. [DOI:10.1016/j.najef.2015.08.005]

3. Azar, A. & Safari, M. (2016). Identifying the Factors Affecting the Sustainability of Private Pension plans Using Fuzzy Cognitive Mapping Methodology. Managemant Science of Iran, 11(43), 21-58. (In Persian)

4. Blake. D., Wright. D. and Zhang, Y. (2013). Target-driven investing: Optimal investment strategies in defined contribution pension plans under loss aversion. Journal of Economic Dynamics and Control, 37(1), 195-209. [DOI:10.1016/j.jedc.2012.08.001]

5. Chen., H., Li., Z., Zeng., Y. and Sun., J. (2017). Asset allocation under loss aversion and minimum performance constraint in a DC pension plan with inflation risk. Insurance: Mathematics and Economics, 75, 137-150. [DOI:10.1016/j.insmatheco.2017.05.009]

6. Christou, C., Gupta, R. and Wohar, M. (2018). Do house prices hedge inflation in the US? International Review of Economic and Finance. 54, 15-26. [DOI:10.1016/j.iref.2017.12.012]

7. Dashtban Faroji M, Samadi S, Dallali Isfahani R, Fakhar M, Abdollahe Milani M. (2011). Simulating a 55-Period Overlapping Generations Model: An Application of Pension System Reform for Iran. Journal of Economic Modelling Research, 1 (2) ,173-203. (In Persian)

8. Dybal, M. (2014). The Polish pension reform of 2011. Wroclaw Review of Law, Administration & Economics, 4(1), 33-45. [DOI:10.1515/wrlae-2015-0003]

9. European Commission, The 2018 Pension Adequacy Report: current and future income adequacy in old age in the EU, Luxembourg: Publications Office of the European :union:, 2018.

10. Entezari, B. & Hoseininia, N. (2015). Statistical publication of the National Pension Fund. Statistical publication of the National Pension Fund. (In Persian)

11. o Fartookzadeh, H., Rajabi Nohooji, M. & Bairamzadeh, S. (2013). High Consuming Crisis in Proportion to Resources. Strategic Management Studies, 4(15), 131-156. (In Persian)

12. Hoang, T., Lean, H. and Wong, H. (2015). Is gold good for portfolio diversification? A stochastic dominance analysis of the Paris stock exchange. International Review of Financial Analalysis, 42, 98-108. [DOI:10.1016/j.irfa.2014.11.020]

13. Izadbakhsh H, Soleymanzadeh, A, Davari Ardakani H, Zarinbal M. (2017). A Systematic Approach for Asset Liability Management of Pension Funds in a Fuzzy Environment. Journal of Economic Modelling Research, 8 (29) ,201-239. (In Persian) [DOI:10.29252/jemr.8.29.201]

14. Jalili, T. & Moslemi, R. (2014). Identifying and Prioritizing the Effective Factors Facilitating the Implementation of Multi-pillar Pension System. Insurance Research, 2(29), 183-209. (In Persian)

15. Kowalewski, O. (2008). Poland's pension system: An overview. World Economy Research Institute, 02-554. [DOI:10.2139/ssrn.1565827]

16. Kowalczyk-Rolczyńska, P., Grishchenko, N., & Borda, M. (2017). Pension reforms in Poland and Russia: mid-term experiences from the participants' perspective.

17. Könberg, B., Palmer, E., & Sundén, A. (2006). The NDC reform in Sweden: the 1994 legislation to the present. Pension reform: Issues and prospects for non-financial defined contribution (NDC) schemes, 449-66.

18. Konicz A. and Mulvey. J, (2015). Optimal savings management for individuals with defined contribution pension plans. European Journal of Operational Research, 243(1), 233-247. [DOI:10.1016/j.ejor.2014.11.016]

19. Koop, G. (2018). Economic Data Analysis. Translation By Motameni, M. & Hadizadeh, A., donya-e-eqtesad Publication. (In Persian)

20. Motameni, M., Zaroki, S., Zameni, K. (2019). Investigation the possibility of hedging inflation by gold coin in Iran. Quantitative Economics, 6(2), 125-143. (In Persian)

21. Motameni, M. & Zobeiri, H. (2019). Life Insurance Fund without usury: Gold Application in Iran's Inflation Hedging. Islamic Economics, 19(76), 241-259. (In Persian)

22. Mudzimbabwe, W. (2019). A simple numerical solution for an optimal investment strategy for a DC pension plan in a jump diffusion model. Journal of Computational and Applied Mathematics, 360, 55-61. [DOI:10.1016/j.cam.2019.03.043]

23. Nili, M., Khosroshahi, A.R. & Ebrahimi, B. (2012). Social Security Payments and Decision about Timing of Retirement: An Economic Analysis. Economics Research, 12(47), 217-244. (In Persian)

24. Niroomand, M. (1997). Introducing Pension plans. National Pension Fund, Ministry of Welfare & Social Security. (In Persian)

25. OECD (2015), "Recent pension reforms", in Pensions at a Glance 2015: OECD and G20 indicators, OECD Publishing, Paris.

26. Palmer, E. (2002). Swedish pension reform: How did it evolve, and what does it mean for the future? In Social security pension reform in Europe (pp. 171-210). University of Chicago Press. [DOI:10.7208/chicago/9780226241913.003.0008]

27. Qin, Y., Cai, J., & Rhee, S. G. (2020). Do Japanese firms systematically inflate expected rate of returns from defined benefit pension plans?. Pacific-Basin Finance Journal, In Press. [DOI:10.1016/j.pacfin.2020.101321]

28. Raghfar H, Akbarbeygi S. (2015). The Effect of Replacement Rate Changes in Social Security Pension Fund on the Capital Stock, Labor Supply and Saving. Economic Research & Policies, 23 (75) ,45-74. (In Persian)

29. Rezaei, A. & Vaezi mahdavi, M. (2018). Optimal Investment in Mixed Pension Plans with Guaranteed Retirement Benefits, Social Security Qurterly, 13(3), 41-58. (In Persian)

30. Roghanizadeh, M. (1998). Challenges of the pension system in the Islamic Republic of Iran. Journal of Social Security, 9(29), 13-31. (In Persian)

31. Rostami, M., Habibnezhad, S. (2017). The Review of Investment of Iran's Pension Funds in light of Investment Principles. Private Law, 14(1), 95-115. (In Persian)

32. Safari, M. (2018). Sustainability of Hybrid Private Pension Plans Based on Fuzzy Cognitive Mapping and System Dynamics, Insurance Research, 3(33), 81-104. (In Persian)

33. Shin, Y., Yu, B., Greenwood-Nimmo, M. ( 2014). Modelling asymmetric cointegration and dynamic multipliers in an ARDL framework. In: Horrace, W.C., Sickles, R.C. (Eds.), Festschrift in Honor of Peter Schmidt. Springer Science and Business Media, NewYork. [DOI:10.1007/978-1-4899-8008-3_9]

34. Stiglitz, J. (2012). Pulblic Sector Economy. Translation by Asghari, M., SAMT Publication. (In Persian)

35. Tully, E. and Lucey, B. (2007). A power GARCH examination of the goldmarket. Research in International Business and Finance, 21, 316-325. [DOI:10.1016/j.ribaf.2006.07.001]

36. Zobeiri, H. (2019). Reform of pension systems (Experience of Sewden, Poland and Russia). Social Security Research Institute. (In Persian)

37. Wang, S., & Lu, Y. (2019). Optimal investment strategies and risk-sharing arrangements for a hybrid pension plan. Insurance: Mathematics and Economics, 89, 46-62. [DOI:10.1016/j.insmatheco.2019.09.005]