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Allocating Assets in Retirement Savings to Avoid Downside Risk

Donald Lien (Professor of Economics, Department of Economics, University of Texas, San Antonio, 6900 North Loop 1604 West, San Antonio, Texas 78249‐0631)
Thomas Root (Assistant Professor of Finance at Drake University, College of Business and Public Administration, 2507 University Ave, Des Moines, IA 50311)

Managerial Finance

ISSN: 0307-4358

Article publication date: 1 August 2005

787

Abstract

An investor saving for retirement attempts to allocate as sets in a manner that provides enough savings to produce a secure post retirement income. Falling short of the desired saving level has a large negative impact on retirement income and is a major concern for the investor. We empirically investigate the allocation of assets between equities and less risky bonds constrained by a desire to minimize the size and occurrence of a short fall. Contrary to much of the theoretical finance literature, we find that the investor should decrease the portion of saving in equities as the retirement date approaches.

Keywords

Citation

Lien, D. and Root, T. (2005), "Allocating Assets in Retirement Savings to Avoid Downside Risk", Managerial Finance, Vol. 31 No. 8, pp. 18-32. https://doi.org/10.1108/03074350510769785

Publisher

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Emerald Group Publishing Limited

Copyright © 2005, Emerald Group Publishing Limited

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