Assets Allocation Of Residents Under Aging Background

Based on the life-cycle investment theory, I take resident's survival probability into consideration during optimal allocation ratio of risk asset. I establish a optimal portfolio model for max investor's utility over the life and solve that by using the numerical method proposed by Carroll, then analyze the sensitivity of the main factors. I get some important conclusions as: 1) under standard condition, the optimal risk asset allocation rises before retirement and then falls with aging. 2) The optimal risk asset allocation closely related to the aging, which we use the survival probability to denote. With the increasing survival probability, the retirement age is a key node for the optimal risk asset allocation, which rises before the node and falls after that comparing to the standard result. 3) Comparing to the standard result, the optimal risk asset allocation falls with the increasing initial wealth, rises with increasing initial labor income, and rises with the increasing growth rate of labor income. 4) The optimal risk asset allocation is very sensitive to E(Rm), and increases with E(Rm) rise. 5) Considering the bequest, the optimal risk asset allocation rise pre-retirement and fall after retirement.