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Measuring the mandatory risk exposure in the Swedish premium pension system: A study of risk, risk-adjusted performance and risk-adjusted performance measure appropriateness of the premium pension funds in Sweden
Jönköping University, Jönköping International Business School, JIBS, Business Administration.
2016 (English)Independent thesis Advanced level (degree of Master (One Year)), 20 credits / 30 HE creditsStudent thesisAlternative title
Den obligatoriska riskexponeringen i det svenska premiepensionssystemet : En studie om risk, riskjusterad prestation och lämplighet av olika riskjusterade prestationsmått i utvärderingen av svenska premiepensionsfonder (Swedish)
Abstract [en]

The undertaking of assuring a livelihood for the working population after retirement is an undertaking of great importance and magnitude. It is important to assure that the livelihood of the retired population not only is sustained, but also kept at a decent level. There are nevertheless different ways or opinions of how it should be assured and provided. The national public retirement pension system in Sweden is made up out of two parts. The first and largest part is the income pension, which is a defined benefit plan. The second part is a defined contribution plan, called the premium pension. The purpose of this thesis is to study the risk and risk-adjusted performance of the funded Swedish premium pension system, in order to make a verdict if the system is exposing the investors to unnecessarily high levels of risk and if they are compensated for the risk they are exposed to. The risk exposure level and risk-adjusted performance are put in relation to the risk and performance of the index OMX Stockholm 30. The purpose of the thesis is also to analyze the appropriateness of different risk-adjusted performance measures in the evaluation of Swedish premium pension funds. The included and analyzed ratios are the Treynor ratio, Sharpe ratio, Sortino ratio and Calmar ratio. The calculations of risk and risk-adjusted performance measures are based on net asset values from a sample of 30 of the 50 largest Swedish premium pension funds. The estimated risk, risk-adjusted performance and its ranking are analyzed through descriptive statistics, hypothesis testing and Simple linear and Multiple regressions. Based on the risk estimations and design of the Swedish premium pension system, it is concluded that the investors within it are exposed to unnecessarily high levels of risk. It is also concluded that the on average risk-adjusted performance in the Swedish premium pension funds is higher than that of the OMX Stockholm 30, implying that the investors are being properly compensated for the risk they are exposed to. In the opinion of the authors, this fact does nonetheless not justify the concluded high levels of risk in the Swedish premium pension system. The conclusion that the Calmar ratio is the most appropriate risk-adjusted performance measure when evaluating Swedish premium pension funds is also drawn. This is due to the simplicity of the method by which risk is quantified and the relaxed assumptions regarding the underlying return probability distribution. It is also pointed out that the choice of risk-adjusted performance measure is highly influenced by subjectivity and that other included ratios have favorable qualities as well, especially the adaptability of the Sortino ratio. 

Place, publisher, year, edition, pages
Keyword [en]
Swedish premium pension system, national public retirement pensions, pension fund performance, risk measures, risk-adjusted performance measures
National Category
Business Administration
URN: urn:nbn:se:hj:diva-30160ISRN: JU-IHH-FÖA-2-20160215OAI: diva2:932637
Subject / course
IHH, Business Administration
Available from: 2016-06-29 Created: 2016-06-01 Last updated: 2016-06-29Bibliographically approved

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