Understanding the Leveraged Life Cycle Investment Strategy for Defined-Contribution Plan Investors

Wang Luo (), Li Bin and Liu Benjamin
Additional contact information
Wang Luo: Griffith Business School, Griffith University, Griffith, Australia

Financial Planning Research Journal, 2017, vol. 3, issue 2, 12-30

Abstract: We investigate whether the leveraged life cycle strategy, in which leverage is used to buy stocks when investors are young, is able to produce better retirement outcomes than other investment strategies that are currently offered by defined contribution plan providers and those suggested in the literature. Using both historical and bootstrap simulations for the period of 1900-2011 in the US, we find that the leveraged life cycle strategy has an ability to reduce risk, though this ability is relatively insignificant. Further, the leveraged life cycle strategy shows a comparative advantage over the balanced strategy. However, the leveraged life cycle strategy produces retirement outcomes inferior to conventional life cycle strategy, and demonstrates significant inferiority when compared to dynamic life cycle strategy.

Keywords: Life cycle; Defined contribution; Investment strategy (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2478/fprj-2017-0006 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vrs:finprj:v:3:y:2017:i:2:p:12-30:n:1001

DOI: 10.2478/fprj-2017-0006

Access Statistics for this article

Financial Planning Research Journal is currently edited by Mark Brimble

More articles in Financial Planning Research Journal from Sciendo
Bibliographic data for series maintained by Peter Golla ().