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The Journal of Portfolio Management

The Journal of Portfolio Management

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Article

Dynamic Lifecycle Strategies for Target Date
Retirement Funds

Anup K. Basu, Alistair Byrne and Michael E. Drew
The Journal of Portfolio Management Winter 2011, 37 (2) 83-96; DOI: https://doi.org/10.3905/jpm.2011.37.2.083
Anup K. Basu
is a lecturer in the School of Economics and Finance at Queensland University of Technology in Brisbane, Australia. a.basu@qut.edu.au
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  • For correspondence: a.basu@qut.edu.au
Alistair Byrne
is a principal consultant at Investit Ltd in London, U.K. alistair.byrne@investit.com
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  • For correspondence: alistair.byrne@investit.com
Michael E. Drew
is a professor of finance in the Department of Accounting, Finance and Economics at Griffith University in Brisbane, Australia. michael.drew@griffith.edu.au
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  • For correspondence: michael.drew@griffith.edu.au
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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: 37 (2)
The Journal of Portfolio Management
Vol. 37, Issue 2
Winter 2011
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Dynamic Lifecycle Strategies for Target Date
Retirement Funds
Anup K. Basu, Alistair Byrne, Michael E. Drew
The Journal of Portfolio Management Jan 2011, 37 (2) 83-96; DOI: 10.3905/jpm.2011.37.2.083

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Dynamic Lifecycle Strategies for Target Date
Retirement Funds
Anup K. Basu, Alistair Byrne, Michael E. Drew
The Journal of Portfolio Management Jan 2011, 37 (2) 83-96; DOI: 10.3905/jpm.2011.37.2.083
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  • Article
    • Abstract
    • COMPARING CONVENTIONAL AND DYNAMIC LIFECYCLE STRATEGIES
    • SIMULATING WEALTH OUTCOMES
    • SIMULATION RESULTS
    • CONCLUSION
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF

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