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Korean Journal of Financial Studies 2015;44(2):445-483.
Published online April 30, 2015.
Problems and Remedy of Shortfall Risk Measure in Strategic Asset Allocation of National Pension
Se Kyung Oh, Jung Woo Lee
국민연금의 전략적 자산배분시 Shortfall Risk의 적합성에 관한 연구
오세경, 이정우
Abstract
Currently, Korean national pension uses shortfall risk model based on CPI as risk measure when applying Strategic Asset Allocation (SAA). However, the model creates “illusion effect” which means that shortfall risk dramatically increases although there is no change in risk at all when the forecast of CPI rises or the forecast of GDP falls, because the expected returns of individual assets are not related to CPI or GDP. This paper points out the problems and suggests the alternative ways to solve the problems. First, in order to examine if CPI variable can be replaced by the estimated Fisher equation, we perform unit root tests, co-integration tests, and OLS analysis, and find the existence of Fisher effect in Korea. Secondly, to solve the first illusion problem arising when CPI increases, the estimated Fisher equation is substituted into the expected return equation of domestic bonds. Lastly, in order to solve the second illusion problem arising when GDP drops, we replace the existing the expected return equation for domestic stocks by the CAPM that incorporates the estimated Fisher equation into it. Our model shows that shortfall risk moves stably under the 10% control region even when CPI rises or GDP drops suddenly. Therefore, the unstability of shortfall risk model of national pension when CPI and/or GDP change does not result from the shortfall risk measure itself, but from the structural inconsistency problem that the economic variables are not linked to the expected return equations of individual assets.
Key Words: 전략적 자산배분,착시효과,피셔효과,CPI 기준,CPI/besed,Fisher Effect,Illusion Effects,Shortfall Risk,Strategic Asset Allocation
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