OPTIMAL PORTFOLIOS IN DEFINED CONTRIBUTION PENSION SYSTEMS

Eduardo Walker ()

Abante, 2006, vol. 9, issue 2, 99-129

Abstract: We study optimal portfolios for defined contribution (possibly mandatory) pension systems, which maximize expected pensions subject to a risk level. By explicitly considering the present value of future individual contributions and changing the risk-return numeraire to future pension units we obtain interesting insights, consistent with the literature, in a simpler context. Results naturally imply that the local indexed (inflation-adjusted) currency is the benchmark and that the investment horizon is long. Optimal portfolios have a hedging component with an even longer duration than a deferred (real) pension, which begins its lifetime payments upon retirement. Results are illustrated with the parameters obtained for the United States by Campbell and Viceira (2001). It also discusses the implications for emerging market reformed pension systems.

Keywords: Optimal portfolio; Defined contribution; Pension reform; Deferred pension; Emerging markets (search for similar items in EconPapers)
JEL-codes: G11 G18 G23 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.abante.cl/files/ABT/Contenidos/Vol-9-N2/Walker.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pch:abante:v:9:y:2006:i:2:p:99-129

Ordering information: This journal article can be ordered from

Access Statistics for this article

Abante is currently edited by Eduardo Walker

More articles in Abante from Escuela de Administracion. Pontificia Universidad Católica de Chile. Contact information at EDIRC.
Bibliographic data for series maintained by Eduardo Walker ().