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Optimal Portfolio Management for Individual Pension Plans

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  • Christian Gollier

Abstract

We explore the various arguments for and against the recommendation that younger households should invest a larger share of their pension wealth in risky assets. The ability of young agents to compensate their financial losses by saving more during their career provides the strongest argument in favour of younger people investing more aggressively in the stock market. Meanreversion in stock returns yields another argument. However, the uninsurability of the risky human capital goes in the opposite direction, together with the imperfect knowledge that young investors have about the distribution of asset returns.

Suggested Citation

  • Christian Gollier, 2005. "Optimal Portfolio Management for Individual Pension Plans," CESifo Working Paper Series 1394, CESifo.
    • Handle: RePEc:ces:ceswps:_1394
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    Cited by:

    1. Lans Bovenberg & Theo Nijman, 2009. "Developments in pension reform: the case of Dutch stand-alone collective pension schemes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(4), pages 443-467, August.
    2. Gollier, Christian, 2008. "Intergenerational risk-sharing and risk-taking of a pension fund," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1463-1485, June.
    3. Siegmann, Arjen, 2011. "Minimum funding ratios for defined-benefit pension funds," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(3), pages 417-434, July.
    4. Jaime Ruiz-Tagle, 2006. "Financial Markets Incompleteness and Inequality Over the Life-Cycle," Working Papers Central Bank of Chile 405, Central Bank of Chile.
    5. Ramon Moreno & Marjorie Santos, 2008. "Pension systems in EMEs: implications for capital flows and financial markets," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 45-69, Bank for International Settlements.

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    More about this item

    Keywords

    dynamic portfolio choice; pension plan; retirement; time horizon;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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