Research On Effective Investment Of The Individual Account Fund Based On MNL Model

The arrival of aging era has challenged old-age insurance system. Thetraditional “pay-as-you-go” system has been difficult to sustain. At the end of lastcentury, many countries have reformed their old-age insurance system, includingChina. In1995, China converted from traditional “pay-as-you-go” to partialaccumulation model of “combination of social pooling and individual account”.The new institution establishes individual account for each enrollee. However,“empty accounts” of individual run because of the following things: pensioninsurance social accounts run behind expenses, mixed run of social accounts andindividual accounts and social accounts overdraft of individual accounts. Awarethe big problem of “empty accounts”, China has enriched individual accounts fundsof14provinces in three times. With a rapid speed, the whole nation has enriched2700billion funds of individual accounts at the end of March2012.The enriched individual accounts run in two ways. One part is centralgovernment fiscal subsidies. Provincial government entrusted National Council forSocial Security to run and commit a certain rate of return to it. The other part isoperated by local government. Yield of the two part funds differs tremendously.Annual rate of return of the National Social Security is8.41%, which exceeds theinflation rate over nearly6percentage points and exceeds committed rate over4.9percentages. In contrast, investment range of individual account funds managed bylocal government is strictly limited to bank deposits and government bonds. Rateof return of accounts is less than2%in the past10years, which is much lower thaninflation rate. Under such circumstances, domestic academic community havereached a consensus that whether individual account funds preserve is related tosuccess of failure of China’s old-age insurance system reform. Therefore, search ofhigh-efficiency investment way has become a priority. This paper is based onabove object. Specifically, this paper is divided into six chapters:Chapter1is summarization of research background, introduction of the paper’smain content and generalization of the domestic and foreign pension fund Investment Research from the pension insurance fund investment patterns,behavioral finance and determination of investment ratio respectively. Chapter2first tells development process and status of China’s individual account funds. Then,fund balance model is established and the minimum yield requirement to maintainfund balance is calculated. Combined with our personal account fund investmentyield status quo, gap between the existing fund yields and expected yield isconcluded. Next, the paper anal sizes problems in China’s personal account fundinvestment operations. Chapter3talks about comparison of pension fund operatingmodels of the representative countries to extract useful part to China. Combined withthe conclusion of chapter3, chapter4gives investment and operation model suitablefor China’s personal account funds. Thought identification of suitable institutionsfor different roles, the paper supplements the above model from efficiency and riskcontrol. Chapter5applies behavioral portfolio theory and random utility theory toestablish MNL model to describe the investment manager’s actual investmentbehavior. Then,“reference” proportion of the portfolio is concluded through theempirical analysis with investment data of14outstanding Funds. Chapter6givessuggestions of efficient investment of personal account fund based on aboveresearch.This paper makes exploratory research on effective investment of China’spersonal account funds on the basis of domestic and foreign pension insurance fundresearches. I hope that the paper can provide some reference to our personal accountfund investment operations.