Potential improvements to pension funds performance in Mexico
De la Torre-Torres, Oscar V.;
Santillán-Salgado, José &
Markov-Switching models, Active portfolio management, SIEFORE, Markov-Switching Sharpe ratio, Noisy pension fund selection, Portfolio performance
Nowadays, the average Mexican pension saver makes a noisy and uninformed investment decision of its Public pension fund (AFORE). This is due to AFORE’s marketing efforts or back-to-back activities. In the present paper, we propose the use of Markov- Switching models, in order to measure the AFORE performance in normal (crisis) or low (high) volatility time periods. With these measures, we simulated the correspondent fund selection. Our results show improvements in the long-term performance in the individuals’ pension savings.