Empirical evidence suggests that asset returns correlate more strongly in bear markets than conventional correlation estimates imply. We propose a method for determining complete tail-correlation matrices based on Value-at-Risk (VaR) estimates. We demonstrate how to obtain more efficient...

Since the enactment of Pension Protection Act of 2006, lifecycle funds that reduce exposure to stocks with age have rapidly replaced money market funds as the most commonly nominated default investment options for participant-directed retirement plans. We examine their appropriateness in meeting...

We prove a formula for the computation of optimal financial investments in an expected utility framework with arbitrary (not necessarily concave) utility functions. This extends classical results on optimal financial investments for strictly concave utility functions and is of importance...

A model of bank’s dynamic asset management problem in case of partially observed future economic conditions and requirements concerning level of risk taken has been built. It requires solving the resulting optimal control with random terminal condition resulting from partial observation of...

An important and frequently studied question for retirees is: what is the optimal asset allocation during retirement? This article provides a brief but simple message that conservative asset allocations in retirement are quite acceptable after all. A wide range of asset allocations tend to...

Most retirement withdrawal rate studies are either based on historical data or use a particular assumption about portfolio returns unique to the study in question. But planners may have their own capital market expectations for future returns from stocks, bonds, and other assets they deem...

Shortfall risk retirement income analyses offer little insight into how much risk is optimal, and how risk tolerance affects retirement income decisions. This study models retirement income risk in a manner consistent with risk tolerance in portfolio selection in order to estimate optimal asset...

Focusing on a “safe withdrawal rate” and then deriving a “wealth accumulation target” to achieve by the retirement date is the wrong way to think about retirement planning. Such a formulation isolates the working (accumulation) and retirement (decumulation) phases. When considered...

We find evidence that retirees in 2000, in particular, are on course to potentially experience the worst retirement outcomes of any retiree since 1926. This holds for a wide variety of asset allocations and withdrawal rate strategies. Wealth depletion is taking place more rapidly for 2000-era...

This study attempts to quantify whether a 4 percent withdrawal rate can still be considered as safe for U.S. retirees in recent years when earnings valuations have been at historical highs and the dividend yield has been at historical lows. We find that the traditional 4 percent withdrawal rule...