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A Study of the Impact of Investment Strategies on Guaranteed Cost and Income Replacement Ratio under Taiwan New Labor Pension Plan
Journal of Financial Studies
View Archive Info| Field | Value | |
| Title |
A Study of the Impact of Investment Strategies on Guaranteed Cost and Income Replacement Ratio under Taiwan New Labor Pension Plan
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| Creator |
Sharon S. Yang
Chun-Hua Tang |
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| Description |
The labor pension plan in Taiwan was reformed from defined benefit (DB) plan to defined contribution (DC) plan in July 2005. The operation of the pension fund is under a single-fund design and incorporates a minimum rate of return guarantee. This paper attempts to evaluate the cost of such guarantee and investigate how investment strategies affect the guarantee cost and the income-replacement ratio under a multiple-fund setting. We consider the buy-and-hold strategy, threshold strategy and the strategies related to the past performance of the alternative portfolios. We adopt Monte Carlo simulation to carry out the numerical analysis. The numerical results show that when employees do not need to pay for the guarantee, they can choose the risky portfolio with high expected rate of return to maximize their expected retirement benefits. In addition, the guarantee cost is affected by investment strategies, the parameters of the interest-rate model and the transaction cost. Key words: Labor Pension Mechanism, Defined Contribution Plan, Guaranteed Rate of Return, Behavioral Finance, Disposition Effect. |
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| Publisher |
Journal of Financial Studies
財務金èžå¸åˆŠ |
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| Date |
2011-03-10
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| Type |
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| Format |
application/pdf
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| Identifier |
http://www.jfs.org.tw/index.php/jfs/article/view/2011059
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| Source |
Journal of Financial Studies; Vol 17, No 1 (2009); 143
財務金èžå¸åˆŠ; Vol 17, No 1 (2009); 143 |
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| Language |
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