The Duration Puzzle in Life-Cycle Investment*

2020 ◽  
Vol 24 (6) ◽  
pp. 1271-1311
Author(s):  
Servaas van Bilsen ◽  
Ilja A Boelaars ◽  
A. Lans Bovenberg
Keyword(s):  
Human Capital ◽  
Life Cycle ◽  
Portfolio Theory ◽  
Optimal Portfolio ◽  
Inflation Risk ◽  
Target Date ◽  
Target Date Funds ◽  
Portfolio Allocations ◽  
The Impact

Abstract By analyzing the portfolio allocations of target date funds (TDFs), we document that the observed durations of TDF portfolios are inconsistent with the durations predicted by classical portfolio theory. We call this stylized fact the duration puzzle. We investigate to what extent several extensions of classical portfolio theory can explain the duration puzzle. More specifically, we consider the impact of human capital, inflation risk, and portfolio restrictions on the duration of the optimal portfolio. We find that it is difficult to explain the duration puzzle, especially for individuals aged between 35 and 65 years.

Balancing on the Life Cycle: Target-Date Funds Need Better Diversification

2016 ◽  
Vol 42 (4) ◽  
pp. 12-27 ◽  
Author(s):  
Jusvin Dhillon ◽  
Antti Ilmanen ◽  
John Liew
Keyword(s):  
Life Cycle ◽  
Target Date ◽  
Target Date Funds

scholarly journals The formation of the enterprises human capital in the context of digitalization

2020 ◽  
Vol 164 ◽  
pp. 09011 ◽  
Author(s):  
Oksana Pirogova ◽  
Marina Makarevich
Keyword(s):  
Human Capital ◽  
Life Cycle ◽  
Service Sector ◽  
Digital Technologies ◽  
Life Cycle Stage ◽  
Information Environment ◽  
Relevant Today ◽  
New Information ◽  
Individual Enterprise ◽  
The Impact

The use of human resources, both in the development of an individual enterprise, and in the development of the whole country, plays an important role, therefore, issues related to the formation of "human capital" and methods for assessing it are relevant today. Today, digital technologies penetrate into all spheres of the economic activity of society and contribute to the formation of a new information environment for economic entities. Digitalization as an objective process has an impact on the development of individual sectors of the national economy, including enterprises in the service sector. The article discusses the positive and negative aspects of the impact of digitalization on the activities of service enterprises. The analysis performed in the study allowed us to identify the main problems of the use of human capital in digitalization and to identify its key features. The features of the formation of human capital of enterprises in the service sector at the stages of the life cycle are considered. A technique is proposed for evaluating the effectiveness of investments in the human capital of service enterprises, which is based on a combined assessment of the elements of human capital using the CIV and MVAIC methods, as well as taking into account the life cycle stage.

scholarly journals Seven Life Priorities in Retirement

2017 ◽  
Author(s):  
Surya Kolluri ◽  
Cynthia Hutchins
Keyword(s):  
Labor Market ◽  
Life Cycle ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Financial Advice ◽  
Financial Advisor ◽  
Fixed Weight ◽  
Target Date ◽  
Target Date Funds ◽  
Financial Portfolios

Using a theoretical life cycle model, this chapter evaluates how much workers benefit from having the option to hire a financial advisor when it is costly for employees to rebalance their own financial portfolios. Results indicate that having access to a financial advisor at the start of one’s career can be quite beneficial. If delegation to an advisor is available only a decade after entering the labor market, the benefit of delegation is cut by half, and it falls further if delegation is available only later in life (at age 60). The chapter also examines whether simpler target date funds (TDF) and fixed weight portfolios benefit consumers, compared to the outcomes with customized financial advice. The authors show that the simpler portfolio products would need to be provided at zero cost, in order to benefit consumers as much as having access to a financial advisor.

The Impact of Income Taxes on Labor's Productivity: A Human Capital Approach

1975 ◽  
Vol 3 (4) ◽  
pp. 361-379 ◽  
Author(s):  
Paula E. Stephan
Keyword(s):  
Human Capital ◽  
Life Cycle ◽  
Income Tax ◽  
Capital Accumulation ◽  
Early Years ◽  
Fixed Amount ◽  
Relative Value ◽  
Personal Skills ◽  
The Individual ◽  
The Impact

This paper explores the impact of several income tax policies on the acquisition of personal skills within the framework of a life-cycle model of human capital accumulation. The analysis considers the impact of taxes during both the early years of the life cycle when the individual allocates all time to learning and during the later years when the individual participates in the market. The paper demonstrates that an income tax can lower the market productivity of the labor force even when it is assumed that the individual allocates a fixed amount of time to the production of human capital and the market. Specifically, I demonstrate that a tax on earned income can lead to a flatter age-capital profile, and in addition, that the imposition of a tax will make the training process relatively more time intensive since the tax policy operates to lower the relative value of time.

scholarly journals The Impact of AIDS Treatment on Savings and Human Capital Investment in Malawi

2018 ◽  
Vol 10 (1) ◽  
pp. 266-306 ◽  
Author(s):  
Victoria Baranov ◽  
Hans-Peter Kohler
Keyword(s):  
Human Capital ◽  
Life Cycle ◽  
Life Expectancy ◽  
Capital Investment ◽  
Human Capital Investment ◽  
Spatial And Temporal Variation ◽  
African Countries ◽  
Sub Saharan ◽  
Children's Schooling ◽  
The Impact

Antiretroviral therapy (ART), a treatment for AIDS, is rapidly increasing life expectancy throughout sub-Saharan African countries affected by the AIDS epidemic. This change in life expectancy has potentially profound influences on life-cycle decisions. A longer life expectancy increases the value of human capital investment, while the effect on savings is theoretically ambiguous and life-cycle saving could increase or decrease. This paper uses spatial and temporal variation in ART availability to evaluate the impact of ART provision on savings and investment. We find that ART availability significantly increases savings, expenditures on education, and children's schooling, including among HIV-negative individuals who do not directly benefit from ART. These results are not driven by the direct health effects of treatment or reductions in caretaking responsibilities, but rather by reduced perceptions of mortality risk after ART has become available. (JEL D14, D15, I12, I15, J24, O12)

scholarly journals Dynamic optimization model of formation of an optimal portfolio of regional strategic projects for maximal advancement on the development of human capital

2019 ◽  
pp. 31-45
Author(s):  
Lev Solomonovich Mazelis ◽  
Kirill Igorevich Lavrenyuk ◽  
Elena Viktorovna Krasova ◽  
Andrei Aleksandrovich Krasko
Keyword(s):  
Human Capital ◽  
Dynamic Optimization ◽  
Optimization Model ◽  
Functional Dependence ◽  
Target Function ◽  
Weighted Average ◽  
Resource Scarcity ◽  
Optimal Portfolio ◽  
Dynamic Optimization Model ◽  
The Impact

This study is conducted within the framework of a relevant scientific research objective consisting in the accumulation and development of regional human capital. In the conditions of uncertainty, risks and resource scarcity, the regional authorities are facing the task of optimal distribution of the budget between strategic projects, which exert direct or indirect influence upon the development of regional human capital. On the example of Primorksy Krai, the goal of this research consists in structuring and approbation of a dynamic optimization model for formation of an optimal portfolio of regional strategic projects form maximally efficient development of human capital in the region. The authors develop a dynamic model in form of a task of a mathematical programming and describing the impact of regional strategic projects upon the human capital indexes in the region. As the target function, the work uses weighted average of the degree of meeting the objective value of regional human capital development indexes on the examined horizon of planning. The functional dependence of human capital indexes upon the volume and structure of investments, forming from the regional budgetary and private spending on the implementation of the projects and ensuring procedural activity on the regional level, serve as lagged econometric models. Variables for conducting optimization are represented by the Boolean variables of inclusion of the project by one or another vector of investing into the project portfolio in a particular moment in time. The optimal portfolio of strategic projects is proposed in annual dynamics, based on the results of the modeling and quantitative calculations made on the example of Primorsky Krai. Such portfolio provides for maximal efficiency in reaching objective values of development of the regional human capital indexes.

scholarly journals Stock Market Mean Reversion and Portfolio Choice over the Life Cycle

2017 ◽  
Vol 52 (3) ◽  
pp. 1183-1209 ◽  
Author(s):  
Alexander Michaelides ◽  
Yuxin Zhang
Keyword(s):  
Life Cycle ◽  
Stock Market ◽  
Portfolio Choice ◽  
Short Sales ◽  
Income Risk ◽  
Welfare Losses ◽  
Out Of Sample ◽  
Target Date ◽  
Target Date Funds ◽  
Timing Strategies

We solve for optimal consumption and portfolio choice in a life-cycle model with short-sales and borrowing constraints; undiversifiable labor income risk; and a predictable, time-varying, equity premium and show that the investor pursues aggressive market timing strategies. Importantly, in the presence of stock market predictability, the model suggests that the conventional financial advice of reducing stock market exposure as retirement approaches is correct on average, but ignoring changing market information can lead to substantial welfare losses. Therefore, enhanced target-date funds (ETDFs) that condition on expected equity premia increase welfare relative to target-date funds (TDFs). Out-of-sample analysis supports these conclusions.

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