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The Application of Expected-Utility Theory to the Choice of Investment Channels in a Defined-Contribution Retirement Fund

Published online by Cambridge University Press:  09 August 2013

Shaun Levitan  and
Robert Thomson
Shaun Levitan
Affiliation:
Colourfield, PO Box 785535, Sandton, 2146, E-Mail: [email protected]
Robert Thomson
Affiliation:
School of Statistics and Actuarial Science, University of the Witwatersrand, Private Bag 3, Wits, 2050, E-Mail: [email protected]
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Abstract

This study examines the practical application of a system for the derivation of member utility functions for the purpose of recommending investment-channel choice to members of a defined-contribution retirement fund. The utility functions of post-retirement benefits from members of a defined-contribution fund are elicited. The risk aversion of each member is measured and the results are compared with a standard risk-tolerance assessment method.

Keywords

Defined contributionInvestment-channel choiceRisk toleranceRisk aversionUtility function
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 39 , Issue 2 , November 2009 , pp. 615 - 647
Copyright
Copyright © International Actuarial Association 2009

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