Net Contribution, Liquidity, and Optimal Pension Management = Net Contribution, Liquidity, and Optimal Pension Management

다국어 초록 (Multilingual Abstract)

This paper presents an optimal portfolio balancing strategy for a pension fund manager in the presence of fixed and proportional transaction costs with respect to stock trades and changes in net contribution. An analytic solution to the one-period problem is presented and a heuristic method for a multi-period problem is developed. For reasonably-calibrated parameters, we find that our numerical results explain the actual asset allocation schemes of some internationally- renowned pension funds. Moreover, we show that net contribution and liquidity have significant impacts on the optimal asset allocation of a pension fund.