Page 339 - Contributed Paper Session (CPS) - Volume 7

CPS2120 Grażyna Trzpiot et al.
Table 1. Risk factor loads of principal components: Germany
Variable F1 F2 F3
Old Age Dependence Ratio 0.93
GDP 0.92
Gross Saving 0.93
CPI 0.80
Long-term Care Expenditures 0.95
Long-term Government Bond Yields -0.89
REER 0.92
Unemployment Rate -0.90
Dividend Fund 0.75
Real Estate Fund 0.63
LE65 0.88
LE birth 0.97
DAX 0.75
EUR/PLN 0.74
EUR/USD -0.85
Cumulative Var 0.59 0.73 0.83
Source: own calculations
For Germany (tab. 1) the first principal component explains 59% of the
variation, while all components – 83%. The first component is identified as the
wealth risk because of the high positive factor loadings on GDP, gross savings,
long-term care expenditures combined with a high negative weighting on
long-term government bond yields and unemployment rate. All these
variables are associated with standard of living risk and elderly needs risk. The
second component has been high loadings of variables that reflect longevity.
Advancing age due to increased life expectancy itself is a risk factor. The last
component explains 10% of total variance and has been loaded only by REER
and real estate fund and it would associate with financial market risk.

Table 2. Risk factor loads of principal components: Spain
Variable F1 F2 F3
Old Age Dependence Ratio 0.93
GDP -0.94
Gross Saving -0.55
CPI 0.83
Long-term Care Expenditures -0.66
Long-term Government Bond Yields -0.78
REER -0.61
Unemployment Rate 0.93
Dividend Fund 0.69

326 | I S I W S C 2 0 1 9