IDEAS home Printed from https://ideas.repec.org/a/vrs/finprj/v3y2017i2p12-30n1001.html
   My bibliography  Save this article

Understanding the Leveraged Life Cycle Investment Strategy for Defined-Contribution Plan Investors

Author

Listed:
  • Wang Luo

    (Griffith Business School, Griffith University, Griffith, Australia)

  • Li Bin
  • Liu Benjamin

Abstract

We investigate whether the leveraged life cycle strategy, in which leverage is used to buy stocks when investors are young, is able to produce better retirement outcomes than other investment strategies that are currently offered by defined contribution plan providers and those suggested in the literature. Using both historical and bootstrap simulations for the period of 1900-2011 in the US, we find that the leveraged life cycle strategy has an ability to reduce risk, though this ability is relatively insignificant. Further, the leveraged life cycle strategy shows a comparative advantage over the balanced strategy. However, the leveraged life cycle strategy produces retirement outcomes inferior to conventional life cycle strategy, and demonstrates significant inferiority when compared to dynamic life cycle strategy.

Suggested Citation

Handle: RePEc:vrs:finprj:v:3:y:2017:i:2:p:12-30:n:1001
DOI: 10.2478/fprj-2017-0006
as

Download full text from publisher

File URL: https://doi.org/10.2478/fprj-2017-0006
Download Restriction: no
File URL: https://libkey.io/10.2478/fprj-2017-0006?utm_source=ideas
LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
---><---

Corrections

All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:finprj:v:3:y:2017:i:2:p:12-30:n:1001. See general information about how to correct material in RePEc.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

We have no bibliographic references for this item. You can help adding them by using this form .

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.