Long-run savings and investment strategy optimization

We focus on automatic strategies to optimize life cycle savings and investment. Classical optimal savings theory establishes that, given the level of risk aversion, a saver would keep the same relative amount invested in risky assets at any given time. We show that, when optimizing lifecycle investm...

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Authors: Gerrard, Russell, Guillén, Montserrat, Nielsen, Jens Perch, Pérez Marín, Ana María
Format: article
Status:Published version
Publication Date:2014
Country:España
Institution:Varias* (Consorci de Biblioteques Universitáries de Catalunya, Centre de Serveis Científics i Acadèmics de Catalunya)
Repository:Recercat. Dipósit de la Recerca de Catalunya
OAI Identifier:oai:recercat.cat:2445/69486
Online Access:https://hdl.handle.net/2445/69486
Access Level:Open access
Keyword:Societats d'inversió
Avaluació del risc
Risc (Economia)
Estalvi
Mutual funds
Risk assessment
Risk
Saving
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oai_identifier_str oai:recercat.cat:2445/69486
network_acronym_str ES
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repository_id_str
spelling Long-run savings and investment strategy optimizationGerrard, RussellGuillén, MontserratNielsen, Jens PerchPérez Marín, Ana MaríaSocietats d'inversióAvaluació del riscRisc (Economia)EstalviMutual fundsRisk assessmentRiskSavingWe focus on automatic strategies to optimize life cycle savings and investment. Classical optimal savings theory establishes that, given the level of risk aversion, a saver would keep the same relative amount invested in risky assets at any given time. We show that, when optimizing lifecycle investment, performance and risk assessment have to take into account the investor's risk aversion and themaximum amount the investor could lose, simultaneously. When risk aversion andmaximumpossible loss are considered jointly, an optimal savings strategy is obtained, which follows fromconstant rather than relative absolute risk aversion. This result is fundamental to prove that if risk aversion and the maximumpossible loss are both high, then holding a constant amount invested in the risky asset is optimal for a standard lifetime saving/pension process and outperforms some other simple strategies. Performance comparisons are based on downside risk-adjusted equivalence that is used in our illustration.Hindawi Publishing Corporation2016201620142016info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersion13 p.application/pdfapplication/pdfhttps://hdl.handle.net/2445/69486Articles publicats en revistes (Econometria, Estadística i Economia Aplicada)reponame:Recercat. Dipósit de la Recerca de Catalunyainstname:Varias* (Consorci de Biblioteques Universitáries de Catalunya, Centre de Serveis Científics i Acadèmics de Catalunya)InglésReproducció del document publicat a: http://dx.doi.org/10.1155/2014/510531Scientific World Journal, 2014, vol. 2014, num. 510531, p. 1-13http://dx.doi.org/10.1155/2014/510531cc-by (c) Gerrard, Russell et al., 2014http://creativecommons.org/licenses/by/3.0/esinfo:eu-repo/semantics/openAccessoai:recercat.cat:2445/694862026-05-29T05:05:01Z
dc.title.none.fl_str_mv Long-run savings and investment strategy optimization
title Long-run savings and investment strategy optimization
spellingShingle Long-run savings and investment strategy optimization
Gerrard, Russell
Societats d'inversió
Avaluació del risc
Risc (Economia)
Estalvi
Mutual funds
Risk assessment
Risk
Saving
title_short Long-run savings and investment strategy optimization
title_full Long-run savings and investment strategy optimization
title_fullStr Long-run savings and investment strategy optimization
title_full_unstemmed Long-run savings and investment strategy optimization
title_sort Long-run savings and investment strategy optimization
dc.creator.none.fl_str_mv Gerrard, Russell
Guillén, Montserrat
Nielsen, Jens Perch
Pérez Marín, Ana María
author Gerrard, Russell
author_facet Gerrard, Russell
Guillén, Montserrat
Nielsen, Jens Perch
Pérez Marín, Ana María
author_role author
author2 Guillén, Montserrat
Nielsen, Jens Perch
Pérez Marín, Ana María
author2_role author
author
author
dc.subject.none.fl_str_mv Societats d'inversió
Avaluació del risc
Risc (Economia)
Estalvi
Mutual funds
Risk assessment
Risk
Saving
topic Societats d'inversió
Avaluació del risc
Risc (Economia)
Estalvi
Mutual funds
Risk assessment
Risk
Saving
description We focus on automatic strategies to optimize life cycle savings and investment. Classical optimal savings theory establishes that, given the level of risk aversion, a saver would keep the same relative amount invested in risky assets at any given time. We show that, when optimizing lifecycle investment, performance and risk assessment have to take into account the investor's risk aversion and themaximum amount the investor could lose, simultaneously. When risk aversion andmaximumpossible loss are considered jointly, an optimal savings strategy is obtained, which follows fromconstant rather than relative absolute risk aversion. This result is fundamental to prove that if risk aversion and the maximumpossible loss are both high, then holding a constant amount invested in the risky asset is optimal for a standard lifetime saving/pension process and outperforms some other simple strategies. Performance comparisons are based on downside risk-adjusted equivalence that is used in our illustration.
publishDate 2014
dc.date.none.fl_str_mv 2014
2016
2016
2016
dc.type.none.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
format article
status_str publishedVersion
dc.identifier.none.fl_str_mv https://hdl.handle.net/2445/69486
url https://hdl.handle.net/2445/69486
dc.language.none.fl_str_mv Inglés
language_invalid_str_mv Inglés
dc.relation.none.fl_str_mv Reproducció del document publicat a: http://dx.doi.org/10.1155/2014/510531
Scientific World Journal, 2014, vol. 2014, num. 510531, p. 1-13
http://dx.doi.org/10.1155/2014/510531
dc.rights.none.fl_str_mv cc-by (c) Gerrard, Russell et al., 2014
http://creativecommons.org/licenses/by/3.0/es
info:eu-repo/semantics/openAccess
rights_invalid_str_mv cc-by (c) Gerrard, Russell et al., 2014
http://creativecommons.org/licenses/by/3.0/es
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv 13 p.
application/pdf
application/pdf
dc.publisher.none.fl_str_mv Hindawi Publishing Corporation
publisher.none.fl_str_mv Hindawi Publishing Corporation
dc.source.none.fl_str_mv Articles publicats en revistes (Econometria, Estadística i Economia Aplicada)
reponame:Recercat. Dipósit de la Recerca de Catalunya
instname:Varias* (Consorci de Biblioteques Universitáries de Catalunya, Centre de Serveis Científics i Acadèmics de Catalunya)
instname_str Varias* (Consorci de Biblioteques Universitáries de Catalunya, Centre de Serveis Científics i Acadèmics de Catalunya)
reponame_str Recercat. Dipósit de la Recerca de Catalunya
collection Recercat. Dipósit de la Recerca de Catalunya
repository.name.fl_str_mv
repository.mail.fl_str_mv
_version_ 1869402976148258816
score 15,812429

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