Dynamic discrete-time portfolio selection for defined contribution pension funds with inflation risk

<p style='text-indent:20px;'>This paper investigates a multi-period asset allocation problem for defined contribution (DC) pension fund facing stochastic inflation under the Markowitz mean-variance criterion. The rate is described by discrete-time version of Ornstein-Uhlenbeck process. To best our knowledge, literature along line dynamic portfolio selection dominated continuous-time models. This first work to investigate in setting. Using techniques state variable transformation, matrix theory, and programming, we derive analytical expressions efficient investment strategy frontier. Moreover, model's exceptional cases are discussed, indicating that theoretical results consistent with existing literature. Finally, established tested through empirical studies based on Australia's data, where there typical DC system. impacts inflation, horizon, estimation error, superannuation guarantee frontier illustrated.</p>