Performance persistence of Icelandic pension funds 1997-2017

Abstract

This article analyses the performance persistence or consistency of the return on assets for Iceland‘s mandatory pension funds, i.e. whether past performance gives an indication of future performance. The data used shows the annual real return of all of Iceland’s pension funds in the period 1997 until 2017. Three different statistical methods are used, regression analysis, contingency tables and rank-sum analysis (MWW). The conclusion is that performance is only persistent in the short run, when comparing adjacent years, but seems to decrease or even be reversed in the long run. This is in line with findings from previous research in other markets. One practical implication of this is that it does not seem a good strategy to pick a pension fund based on past returns. At least that should not be the main criteria.