Dynamic Lifecycle Strategies for Target Date Retirement Funds
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Byrne, Alistair
Drew, Michael E
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Frank Fabozzi
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Abstract
Lifecycle funds offered to retirement plan participants gradually reduce exposure to stocks as the funds approach the target date of the participants' retirement.The authors show that such deterministic switching rules produce inferior wealth outcomes for the investor compared to strategies that dynamically alter the allocation between growth and conservative assets based on cumulative portfolio performance relative to a set target.The dynamic allocation strategies proposed in this article exhibit almost stochastic dominance over strategies that unidirectionally switch assets without consideration of portfolio performance.
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The Journal of Portfolio Management
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37
Issue
2
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© 2011 Institutional Investor. This is the author-manuscript version of this paper. Reproduced in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
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Banking, finance and investment
Finance