Asset Allocation, Life Expectancy and Shortfall

Authors

  • Kwok Ho Faculty of Administrative Studies, Atkinson College, York University, North York, CANADA M3J lP3.
  • Moshe Arye Milevsky Faculty of Administrative Studies, Atkinson College, York University, North York, CANADA M3J lP3.
  • Chris Robinson Faculty of Administrative Studies, Atkinson College, York University, North York, CANADA M3J lP3.

DOI:

https://doi.org/10.1016/1057-0810(94)90017-5

Abstract

An analytical model provides a solution to the retirement problem of how to allocate investment between risky and risk-free assets. The objective is to minimize the probability that the retiree will beunabletoconsumeatthedesiredleveloverhis/herexpectedlifetime.Theprocedure incorporates mortality tables, real or nominal rates of return, initial wealth, and desired consumption levels. Numerical examples using standard mortality tables, historic rates of return on Canadian equity and treasury bills, and a range of realistic values for wealth and consumption show that equity should play a much bigger role in retirement portfolios than other writers advise.

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Published

1994-12-30

Issue

Vol. 3 No. 2 (1994): Financial Services Review

Section

New Original Submission

License

Copyright (c) 1994 JAI Press Inc.

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How to Cite

Asset Allocation, Life Expectancy and Shortfall. (1994). Financial Services Review, 3(2), 109-126. https://doi.org/10.1016/1057-0810(94)90017-5