Robust optimal investment strategies of DC pension plan under limited attention allocation

This article investigates the robust optimal investment strategies for defined contribution pension plan participants who obtain the interest rate and stock models under limited attention allocation. In addition, suppose that pension contribution rates are subjected by a stochastic differential equation whose volatility comes from the price process of risk assets and interest rates. By using Sims’ information channel capacity models, we first obtain the dynamic models of interest rates and stock prices in steady state, then the robust optimization problem is established. By applying Kalman filtering and robust optimization theories, the robust optimal investment strategy of pension managers is obtained. For comparison, we also consider two special cases that are without limited attentions and models uncertainty. In the end, some numerical examples are carried out, and find that the proportion of pension fund managers investing risk assets under limited attention allocation is higher than that under complete information.