Modeling Optimal Pension Fund Asset Allocation in a Dynamic Capital Market

Jiapeng Liu, Hong Qiu, Xiaoli Zhao and Yingjun Zhu

Emerging Markets Finance and Trade, 2021, vol. 57, issue 8, 2323-2330

Abstract: In this paper, we model optimal pension fund asset allocation strategy in a dynamic capital market by expanding the static capital market line in classical finance theory to a dynamic, time-varying capital market surface. We construct pension fund asset allocation model under certain market trend and solve for the best asset allocation path for pension funds. Using the optimal control theory (minimum principle) to verify the model, we obtain consistent conclusions. This model can not only adapt to the long-term market trend, but also capture market adjustment, and is consistent with the actual condition of pension fund investment.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:57:y:2021:i:8:p:2323-2330

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DOI: 10.1080/1540496X.2019.1603521

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