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http://dx.doi.org/10.22156/CS4SMB.2021.11.02.082

Dynamic Glide Path using Retirement Target Date and Forecast Volatility  

Kim, Sun Woong (Trading System Major, Graduate School of Business IT, Kookmin University)
Publication Information
Journal of Convergence for Information Technology / v.11, no.2, 2021 , pp. 82-89 More about this Journal
Abstract
The objective of this study is to propose a new Glide Path that dynamically adjusts the risky asset inclusion ratio of the Target Date Fund by simultaneously considering the market's forecast volatility as well as the time of investor retirement, and to compare the investment performance with the traditional Target Date Fund. Forecasts of market volatility utilize historical volatility, time series model GARCH volatility, and the volatility index VKOSPI. The investment performance of the new dynamic Glide Path, which considers stock market volatility has been shown to be excellent during the analysis period from 2003 to 2020. In all three volatility prediction models, Sharpe Ratio, an investment performance indicator, is improved with higher returns and lower risks than traditional static Glide Path, which considers only retirement date. The empirical results of this study present the potential for the utilization of the suggested Glide Path in the Target Date Fund management industry as well as retirees.
Keywords
Retirement Asset Management; Glide Path; Target Date Fund; Historical Volatility; GARCH Model; Volatility Index;
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