Who Fire-Sells? Public Pensions as Conditional, Not Aggregate, Sellers in Drawdowns

DOI

10.2991/978-94-6239-825-2_30How to use a DOI?

Keywords

Public pension systems; Financial stability; Institutional heterogeneity; Macro- prudential oversight; Public crisis and risk management

Abstract

As critical vehicles for public employee retirement benefits and state fiscal stability, equity-heavy public pension funds are frequently scrutinized for potentially amplifying systemic market volatility during economic drawdowns. Using a U.S. panel from 2000 to 2026, we triangulate plan-level implied active flows against Federal Reserve and Census sec- tor data and show that aggregate public pensions are net equity buyers in drawdowns: their net selling is positively correlated with the contemporaneous market return (+0.50 to +0.57 across sources) and does not predict next-quarter realized variance or VIX. That stability masks a level-of-analysis distinction. Plans simultaneously cash-flow negative and heavily allocated to illiquid alternatives cut their crisis-period buying, robustly to lagged timing and two-way fixed effects, and quantile regressions show this pressure to be a broad downward level shift across the flow distribution rather than a localized fire-sale tail. Headline funded status is an unreliable early-warning metric: underfunded plans buy more equity in crises. Accordingly, we put forward a conditional vulnerability map. At the same time, we con- tend that both macroprudential governance and public service oversight ought to shift their focus away from reliance on aggregate accounting labels and toward the monitoring of dynamic liquidity constraints. Such a reorientation is essential for safeguarding the long-term sustainability of public pension systems.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Jiayu Yi
AU  - Ziheng Chen
AU  - Wenxi Sun
AU  - Minxuan Hu
AU  - Qishi Zhan
PY  - 2026
DA  - 2026/11/10
TI  - Who Fire-Sells? Public Pensions as Conditional, Not Aggregate, Sellers in Drawdowns
BT  - Proceedings of the 2026 5th International Conference on Public Service, Economic Management and Sustainable Development (PESD 2026)
PB  - Atlantis Press
SP  - 305
EP  - 313
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-825-2_30
DO  - 10.2991/978-94-6239-825-2_30
ID  - Yi2026
ER  -