This paper explores how to structure choices for personal investment accounts that have a well-defined set of target dates. Key examples are investing for retirement or for a child's college education. We show that if the investor's objective is to minimize the ex ante cost of hitting specific...

This paper proposes a functional approach to designing and managing the financial systems of countries, regions, firms, households, and other entities. It is a synthesis of the neoclassical, neo-institutional, and behavioral perspectives. Neoclassical theory is an ideal driver to link science...

This paper draws upon the modern science of finance to address several important practical issues in personal finance. Chief among these is how much to save for retirement and how to invest those savings. The paper suggests ways that advances in the theory of finance combined with innovations in...

During the past twenty years, swap contracts have become key financial quot;adaptersquot; linking diverse national financial systems to the global financial network. Today banks and investment companies around the world use swaps extensively to manage their currency, interest-rate, and...

This paper proposes a new approach to investing for retirement that takes advantage of recent market innovations and advances in finance theory to improve the risk/reward opportunities available to individual investors before and after retirement. The approach introduces three new elements:- It...

As pension plans in the U.S. and other countries shift from defined benefit to defined contribution plans, employees are being asked to bear investment risk formerly borne by employers and/or governments. Using a simulation model, this paper examines the performance of alternative investment...

This paper examines individual asset-allocation behavior using data from a unique survey containing information on the composition of the respondents' total asset holdings both inside and outside of their retirement accounts. We find that individual asset allocations are consistent with the...

This paper examines the proposition that investing in common stocks is less risky the longer an investor plans to hold them. If the proposition were true, then the cost of insuring against earning less than the risk-free rate of interest should decline as the length of the investment horizon...

Target-date funds (TDFs) for retirement, also known as life-cycle funds, are being offered as a simple solution to the investment task of participants in self-directed retirement plans. A TDF is a quot;fund of fundsquot; diversified across stocks, bonds, and cash with the feature that the...

This paper proposes a functional approach to designing and managing the financial systems of countries, regions, firms, households, and other entities. It is a synthesis of the neoclassical, neo-institutional, and behavioral perspectives. Neoclassical theory is an ideal driver to link science...