The Trimmed Bootstrap: An Empirical Simulation Technique for Pension Finance Researchers

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Doran, Brett
Bornholt, Graham
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2017
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Abstract

Different variations of the Efron [1979] bootstrap have become popular tools for simulating retirement outcomes. However, to date, no study has examined their accuracy when they are used to simulate retirement outcomes. We test the accuracy of the competing bootstrap methods through a series of out-of-sample tests. The analysis shows that these bootstraps can be wildly inaccurate. Our concerns with existing methods lead us to propose a new bootstrap: the “trimmed” bootstrap. Its significantly greater accuracy will benefit policymakers, advisers, and fund members.

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Journal of Retirement

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4

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3

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Finance

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