Portfolio selection of the defined contribution pension fund with uncertain return and salary: A multi-period mean-variance model

Article type: Research Article

Authors: Liu, Yali | Yang, Meiying | Zhai, Jia^{; *} | Bai, Manying

Affiliations: School of Economics and Management, Beihang University, Beijing, China

Correspondence: [*] Corresponding author. Jia Zhai, School of Economics and Management, Beihang University, Beijing 100191, China. E-mail: [email protected].

Abstract: This paper applies uncertainty theory to the asset allocation problem for a defined contribution pension fund under a multi-period mean-variance framework. Different from most studies in the literature, both the security return and the salary are considered and assumed to be uncertain variables in this paper. The optimal portfolio adjustments are determined by minimizing the risk within the constraints of controlling the expected total incremental wealth with a minimum guarantee over the investment horizon. The transaction cost is also taken into account to simulate the real capital market. Finally, some special cases are discussed, and a numerical example is presented to illustrate the effectiveness of the model we proposed.

Keywords: Portfolio selection, defined contribution pension fund, multi-period mean-variance model, uncertainty theory

DOI: 10.3233/JIFS-171440

Journal: Journal of Intelligent & Fuzzy Systems, vol. 34, no. 4, pp. 2363-2371, 2018