It has become increasingly popular to advise investors to relocate their funds from a primarily stock portfolio to a primarily bond portfolio as they get older. However, the well-known decision rules such as mean-variance or stochastic dominance rules are unable to explain this common practice....

This paper examines the proportion of wealth invested in stock and bond portfolios as a function of the investors' age, i.e., investment horizon. It has become increasingly popular to advice investors to relocate their funds from a primarily stock portfolio to a primarily bond portfolio as they...