How sub-optimal are age-based life-cycle investment products?

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dc.contributor.authorKhemka, Gaurav
dc.contributor.authorSteffensen, Mogens
dc.contributor.authorWarren, Geoff
dc.date.accessioned2023-03-24T02:59:41Z
dc.date.issued2021
dc.date.updated2022-01-16T07:19:17Z
dc.description.abstractWe investigate the conditions under which life-cycle investment strategies based on age may be ‘near enough’ to optimal, focusing on the treatment of the pension account balance and assumptions about risk aversion. We show that dynamically adjusting the strategy in response to fluctuations in balance as well as age can lead to moderate improvements over product designs currently seen in the market; although most of the potential gains might be captured by specifying the glide path with reference to measures reflecting the projected balance over time. The risk aversion assumption emerges as a far more important consideration, with much greater reductions in expected utility arising from mismatches between the risk aversion of the investor and that underpinning the glide path design. Our analysis suggests possibilities for improving life-cycle or target date funds, and highlights the benefit of offering a suite of such funds that cater for members with differing risk aversion.en_AU
dc.format.mimetypeapplication/pdfen_AU
dc.identifier.issn1057-5219en_AU
dc.identifier.urihttp://hdl.handle.net/1885/287352
dc.language.isoen_AUen_AU
dc.publisherElsevieren_AU
dc.rights© 2020 Elsevier Incen_AU
dc.sourceInternational Review of Financial Analysisen_AU
dc.subjectLife-cycle modelsen_AU
dc.subjectPortfolio optimizationen_AU
dc.subjectInvestment product designen_AU
dc.subjectTarget date fundsen_AU
dc.titleHow sub-optimal are age-based life-cycle investment products?en_AU
dc.typeJournal articleen_AU
local.bibliographicCitation.lastpage15en_AU
local.bibliographicCitation.startpage1en_AU
local.contributor.affiliationKhemka, Gaurav, College of Business and Economics, ANUen_AU
local.contributor.affiliationSteffensen, Mogens, University of Copenhagenen_AU
local.contributor.affiliationWarren, Geoff, College of Business and Economics, ANUen_AU
local.contributor.authoremailu4331462@anu.edu.auen_AU
local.contributor.authoruidKhemka, Gaurav, u4331462en_AU
local.contributor.authoruidWarren, Geoff, u4790111en_AU
local.description.embargo2099-12-31
local.description.notesImported from ARIESen_AU
local.identifier.absfor350208 - Investment and risk managementen_AU
local.identifier.ariespublicationa383154xPUB17367en_AU
local.identifier.citationvolume73en_AU
local.identifier.doi10.1016/j.irfa.2020.101619en_AU
local.identifier.scopusID2-s2.0-85096571127
local.identifier.uidSubmittedBya383154en_AU
local.publisher.urlhttps://www.elsevier.com/en-auen_AU
local.type.statusPublished Versionen_AU

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