PT - JOURNAL ARTICLE AU - Ian Ayres AU - Barry Nalebuff TI - Diversification Across Time AID - 10.3905/jpm.2013.39.2.073 DP - 2013 Jan 31 TA - The Journal of Portfolio Management PG - 73--86 VI - 39 IP - 2 4099 - https://pm-research.com/content/39/2/73.short 4100 - https://pm-research.com/content/39/2/73.full AB - Young people who buy stock on margin and reduce their equity exposure as they age can reduce lifetime portfolio risk. For example, an initially leveraged portfolio produces the same mean accumulation as a constant 74% stock allocation with a 21% smaller standard deviation. Since the means are equal, the reduced volatility doesn’t depend on the equity premium. A leveraged life-cycle strategy also lets investors come closer to their utility-maximizing equity allocation. Monte Carlo simulations show that the gains continue even with equity premiums well below historical levels.TOPICS: Equity portfolio management, in markets, exchanges/markets/clearinghouses