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The Duration Puzzle in Life-Cycle Investment*
- Source :
- Review of Finance, 24(6). Oxford University Press, Review of Finance, 24(6), 1271-1311. OXFORD UNIV PRESS INC
- Publication Year :
- 2020
- Publisher :
- Oxford University Press (OUP), 2020.
-
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.
- Subjects :
- Inflation
Target Date Funds
Economics and Econometrics
Stylized fact
media_common.quotation_subject
Target date fund
Monetary economics
Long-Term Bonds
Investment (macroeconomics)
Human capital
Interest Rate Risk Management
Accounting
Life-Cycle Investment
Economics
Portfolio
Duration (project management)
Finance
Modern portfolio theory
media_common
Subjects
Details
- ISSN :
- 1573692X and 15723097
- Volume :
- 24
- Database :
- OpenAIRE
- Journal :
- Review of Finance
- Accession number :
- edsair.doi.dedup.....f84165b4abd221faebb49dbbaa9d8d90