Title: Mean-variance investment strategy with proportional transaction costs and withdrawal process for a defined contribution pension scheme
Authors: Charles I. Nkeki
Addresses: Department of Mathematics, Faculty of Physical Sciences, University of Benin, P.M.B. 1154, Benin City, Edo State, Nigeria
Abstract: In this paper, we consider an extension of the Markowitz portfolio and investment problem in which transaction costs are incurred; contributions and withdrawals are made by the pension plan members (PPMs) in the investment portfolio. The transaction costs are modelled as a proportion of the value of risky assets transacted. The aims of this paper are to: a) minimise the investment risks; b) minimise the contribution risks and simultaneously maximise amount of contributions; c) strategically minimise the amount of withdrawal by the PPMs. The optimal portfolio, contributions and withdrawal processes, with proportional transaction costs were obtained. Some numerical results are also presented in this paper.
Keywords: mean-variance; investment strategy; withdrawal; transaction costs; pension plan member; PPM; defined contribution; pension scheme.
International Journal of Operational Research, 2019 Vol.34 No.2, pp.213 - 239
Available online: 24 Jan 2019 *Full-text access for editors Access for subscribers Purchase this article Comment on this article