US. The rationality (or otherwise) of public pension fund managers
A new research paper from the Stanford University Graduate School of Business discusses the rationality (or otherwise) of the return expectations of institutional investors, with especial reference to public pension funds.
It finds that the returns that pension fund managers expect from their investments are extrapolated from the returns those investments have made in the past. That is a normal human tendency, to presuppose inertia, but it is not ideally rational.
The report is co-authored by Aleksandar Andonov, of Erasmus University, in Rotterdam, and Joshua D. Rauh, of the Stanford GSB, the Hoover Institution, and the NBER.
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