Research on Pension Portfolio Based on Fama-French 3 Factor Model

Abstract

In today's era of aging population, pension has become a hot issue in society. To do a good job in pension planning, the most indispensable is financial literacy,which is conducive to the construction of a good pension portfolio. This paper is planning to use the Fama-French 3 factor model to build this portfolio,because compared to the CAPM model ,the Fama-French 3 factor model improves explanation, enhances risk measurement, reduces mispricing and its flexibility. This paper will construct an optimal portfolio with the pension, an optimal portfolio without the pension, and a portfolio used to calculate when those two pensions will have the same sharpe ratio, and make a series of analyzes. After taking a number of factors into account,in general,this paper would recommend the retiree to choose optimal portfolio with pension. This paper aims to give retirees some suggestions on pension portfolio through research, provide certain reference and guidance, and draw people's attention to pension planning.