Which are the risk factors in the pricing of Personal Pension Plans in Spain?

Abstract

Contents: 1. Introduction; 2. Literature Review; 3. Sample description; 4. Testing Methodology; 5. Empirical results of testing the APT model; 6. Test of the model suggested by Chen et al. (1986); 7. Conclusions.The aim of this paper is to analyse if the Arbirtrage Pricing Theory or the model suggested by Chen et al. (1986) can efficiently explain the variability of the cross-sectional returns on the Personal Pension Plans in Spain between 1995-2003, as well as to find their sources of risks. To test both models we have followed the traditional two-step cross-sectional regressions by Fama and MacBeth (1973). The results of our analysis show two significant risk factors derived from the fixed-income market: nonanticipated changes in the interest rate term structure and the default risk premium. Chen et al. (1986) Este artigo analisa se o modelo APT ou o modelo sugerido por