Saving Period for a Funded Pension Plan Taking into Account Return and Volatility

Tasks

The expert report is divided into two parts. First, the empirical part analyzes past returns and volatilities of investments in the major stock indices DAX, S&P 500 and MSCI World, taking into account different investment periods. The second part compares the results with the findings of the empirical literature and discusses the role of different investment strategies and costs. 

Methods

Historical analysis of the return on stock markets, literature analysis

Data and other sources

Macrobond

Results

The report concludes that investing in a stock index with an investment horizon of 10 years or more has in the past generated a positive return for the most part, with the proportion of negative returns approaching zero range over longer investment periods. A continuous investment behaved similarly to a one-time investment in terms of return, volatility and loss rate. As an example of a state investment fund, the Norwegian Government Pension Fund Global is considered, which has recovered past losses after two years at the latest. The analysis of the literature supports the results of the empirical analysis and adds possible alternatives to investing purely in equities, depending on the investment horizon.