Pension systems are often treated as background institutions. Households save, invest, and prepare for retirement. But in reality, pension structures play a central role in financial markets. Large pools of capital are managed collectively. Investment decisions are constrained and risks are redistributed across generations. This paper introduces a new perspective. Pension design is not neutral. Defined benefit plans shape asset prices, risk premia, and economic outcomes. The result is a subtle but powerful mechanism. Pension funds influence both markets and households, and changes in pension systems can reshape the entire financial equilibrium.

Asset Pricing and Risk-Sharing Implications of Alternative Pension Plan Systems

NUNO COIMBRA, FRANCISCO GOMES, ALEXANDER MICHAELIDES, JIALU SHEN

The Journal of Finance, 2026

A version of this paper can be found here

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