We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Dynamic Optimal Pension Fund Portfolios when Risk Preferences Are Heterogeneous among Pension Participants.
- Authors
Honda, Toshiki
- Abstract
In this paper, we consider the problem of an optimal pension fund portfolio given the heterogeneous risk preferences of pension fund participants. The relative risk aversion of a pension fund tends to be a decreasing function of the level of aggregate wealth. We find that the dynamic optimal portfolio is simply characterized as the weighted sum of the optimal portfolio for each participant. Our model helps successfully establish the microfoundation of asset liability management models. A numerical example using recent Japanese data indicates the significant total welfare losses of adopting a suboptimal portfolio strategy and an inefficient risk-sharing rule.
- Subjects
INVESTMENT of pension funds; FINANCIAL risk; PENSION trusts; RISK aversion; WEALTH; ASSET-liability management; RISK sharing
- Publication
International Review of Finance, 2012, Vol 12, Issue 3, p329
- ISSN
1369-412X
- Publication type
Article
- DOI
10.1111/j.1468-2443.2011.01148.x