Pension Asset Risk Management in a Perspective of Behavioral Finance

Abstract

The concept of asset management for the corporate pension fund in Japan has changed remarkably in recent years. That is, the asset allocation restriction by book value was abolished in 1997, and instead of this restriction, the concept of fiducially responsibility had introduced and risk management by the policy asset allocation of a traditional assts had been adopted. Though the trend of performance following was observed in the early stage of policy asset allocation from 1998 to 1999, this trend was removed to some degree in the established stage of policy asset allocation from 2000 to 2002, when the stock market was declining. However, risk management by the policy asset allocation doesn’t work well since an increase of the style risk in a traditional assets and diversified investments to the alternative investments such as hedge fund, etc. In this study, I proposed a method of risk management by the systematic risk factors as excluding the tendency of performance following and as avoiding a similar investing to hedge funds in a perspective of behavioral finance.