Optimal Portfolio Management for Individual Pension Plans

26 Pages Posted: 4 Feb 2005

See all articles by Christian Gollier

Christian Gollier

University of Toulouse 1 - Industrial Economic Institute (IDEI); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: February 2005

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. Mean reversion 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.

Keywords: dynamic portfolio choice, pension plan, retirement, time horizon

JEL Classification: G11

Suggested Citation

Gollier, Christian, Optimal Portfolio Management for Individual Pension Plans (February 2005). CESifo Working Paper Series No. 1394. Available at SSRN: https://ssrn.com/abstract=661042

Christian Gollier (Contact Author)

University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France
+33 61 12 86 30 (Phone)
+33 61 12 86 37 (Fax)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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