The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Investment Risk, Bankruptcy Risk, and Pension Reform in Canada
Published: 06/01/1982 | DOI: 10.1111/j.1540-6261.1982.tb02220.x
JAMES E. PESANDO
The wealth redistributive effects of retroactive termination insurance together with the difficulty of determining insurance premiums suggest that an alternative response, such as improved disclosure of worker benefits in the event of plan wind‐up, may be preferred if the government remains concerned about the security of benefits in underfunded plans. Members of money purchase plans may well be less subject to investment risk than members of defined benefit plans, contrary to the claim of many. In Canada, defined benefit plans appear to have been transformed into defined benefit/money purchase hybrids, and this has several important implications.
The Usefulness of the Wind‐Up Measure of Pension Liabilities: A Labor Market Perspective
Published: 07/01/1985 | DOI: 10.1111/j.1540-6261.1985.tb05020.x
JAMES E. PESANDO
Financial economists have long favored the use of a wind‐up measure of the firm's pension liabilities. Yet the pension liabilities of the firm also represent the pension wealth of its workers. It is reasonable to presume that workers and shareholders have a common view of the pension contract. If the wind‐up measure depicts the true pension liabilities of the firm, then the wage concession granted by its workers must reflect the fact that the firm may choose to terminate the plan at any time. Data on the wage‐service characteristics of the membership of a sample of final earnings plans in Canada suggest, contrary to the implications of the wind‐up measure, that workers' wages do not internalize accruing pension benefits on a year‐to‐year basis. Instead, the data suggest that pension plans may be a vehicle through which a significant portion of the total compensation of individual employees is deferred until their later work years, and that the wind‐up measure may well understate the pension liabilities of an on‐going firm.
The October 1979 Change in the U.S. Monetary Regime: Its Impact on the Forecastability of Canadian Interest Rates
Published: 03/01/1988 | DOI: 10.1111/j.1540-6261.1988.tb02598.x
JAMES E. PESANDO, ANDRÉ PLOURDE
Subsequent to the October 1979 shift in monetary policy in the United States, interest rates in North America not only reached unprecedented levels but also exhibited unprecedented volatility. Using Canadian data, the authors show that anticipated quarterly changes in long‐term rates associated with the rational‐expectations model have remained small during this post‐shift period. The authors examine three sets of recorded forecasts of long‐term interest rates in Canada and note their failure to improve upon the no‐change prediction. The “perverse” relationship between the slope of the yield curve and the subsequent movement in long‐term rates exists in the Canadian data but is of only modest value in a forecasting context. The excess returns on long‐term bonds implicit in the recorded forecasts of the level of interest rates vary sharply, yet there is little evidence that forecasters have identified a predictable component of time‐varying term premia.