ABSTRACT
In this chapter we estimate the model of private sector pension fund (PSPF) portfolio behaviour that was developed in Chapter 2, using the expected returns and risks that were estimated in Chapter 4. The main findings are that PSPFs are only moderately risk averse (indeed their portfolio behaviour could be described as being close to risk-neutrality); PSPFs do not have a constant marginal rate of substitution between mean and variance so that their demands for assets are non-linear functions of risks and expected returns; time-varying expectations are important for determining PSPF portfolio behaviour but time-varying risks are not; and the error correction mechanism is important for explaining the dynamic adjustment to PSPF portfolios.
