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Lifecycle and fixed portfolio allocation strategies: a performance comparison for emerging market countries

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  • Kumara, Ajantha Sisira
  • Pfau, Wade Donald

Abstract

This study compares the performance of various fixed and lifecycle portfolio strategies for the accumulation phase of retirement planning in emerging market countries. With an expected utility framework and a bootstrapped Monte Carlo procedure, we find that the majority of emerging market investors with varying attitudes toward risk can maximize their expected utility by using lifecycle strategies instead of fixed allocation strategies. Most commonly, emerging market investors maximize expected utility with a lifecycle strategy using a 30 percent average equity exposure, though the results vary among countries.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31389.

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Date of creation: 09 Jun 2011
Date of revision: 10 Jun 2011
Handle: RePEc:pra:mprapa:31389

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Keywords: Emerging Markets; Fixed Allocations; Lifecycle Allocations; Pension Funds; Monte Carlo Simulations;

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  1. Gary Burtless, 2010. "Lessons of the Financial Crisis for the Design of National Pension Systems," CESifo Economic Studies, CESifo, CESifo, vol. 56(3), pages 323-349, September.
  2. Wade D. Pfau, 2009. "Lifecycle Funds and Wealth Accumulation for Retirement:Evidence for a More Conservative Asset Allocation as Retirement Approaches," GRIPS Discussion Papers 09-15, National Graduate Institute for Policy Studies.
  3. Wade D. Pfau, 2009. "An Optimizing Framework for the Glide Paths of Lifecycle Asset Allocation Funds," GRIPS Discussion Papers 09-16, National Graduate Institute for Policy Studies.
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