Should the Occupational Pension Plans' Investment be Long-Term or Short-Term? Evidence from China

Contrary to the long-term nature of pension funds, occupational pension plans' investments are often short-sighted under the constraints of appraisal mechanisms. This paper investigates whether the investment horizon of occupational pension plans should be long-term or short-term with a multi-stage portfolio selection model. The model takes investments' accumulated wealth and CVaR as the objective function and constrains the investment proportion on equity assets. We solve the model with a scenario tree constructed by the copula-based method. The numerical experiments compare the performance of occupational pension plans under various investment horizons within the Chinese fund market. The results illustrate the advantages of long-term investment while also revealing the existence of an optimal investment horizon, beyond which there is no additional benefit. For long-term investment, we show that a preference for risk and relaxed constraints on equity assets can lead to better performance. The robustness tests concerning parameter sensitivity and time-varying risk attitudes further confirm the main conclusions.