NDLI: Target-Driven Investing: Optimal Investment Strategies in Defined Contribution Pension Plans Under Loss Aversion

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Target-Driven Investing: Optimal Investment Strategies in Defined Contribution Pension Plans Under Loss Aversion

Content Provider	Semantic Scholar
Author	Blake, David J. Wright, Douglas Zhang, Yumeng
Copyright Year	2011
Abstract	Assuming the loss aversion framework of Tversky and Kahneman (1992), stochastic investment and labour income processes, and a path-dependent fund target, we show that the optimal investment strategy for defined contribution pension plan members is a target-driven 'threshold' strategy, whereby the equity allocation is increased if the accumulating fund is below target and is decreased if it is above. However, if the fund is sufficiently above target, the optimal investment strategy switches to 'portfolio insurance'. We show that the risk of failing to attain the target replacement ratio is significantly lower with target-driven strategies than with those associated with the maximisation of expected utility.
Starting Page	195
Ending Page	209
Page Count	15
File Format	PDF HTM / HTML
DOI	10.1016/j.jedc.2012.08.001
Volume Number	37
Alternate Webpage(s)	http://openaccess.city.ac.uk/id/eprint/6844/1/Target-driven%20investing.pdf
Alternate Webpage(s)	https://core.ac.uk/download/pdf/6643454.pdf
Alternate Webpage(s)	http://openaccess.city.ac.uk/6844/1/Target-driven%20investing.pdf
Alternate Webpage(s)	https://mpra.ub.uni-muenchen.de/34278/1/MPRA_paper_34278.pdf
Alternate Webpage(s)	http://www.pensions-institute.org/workingpapers/wp1112.pdf
Alternate Webpage(s)	http://isiarticles.com/bundles/Article/pre/pdf/9892.pdf
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article

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