Impact of persistent bad returns and volatility on retirement outcomes

Anup Basu and Osei K. Wiafe

Finance Research Letters, 2017, vol. 21, issue C, 201-205

Abstract: We examine wealth outcomes and risk of ruin faced by retirees due to persistent bad returns and high volatility in equity markets occurring at different stages of their retirement. Our results show poor equity returns persisting over long periods can put retirement security to serious risk but volatile market conditions actually have the opposite impact. The timing of such persistent bad returns and volatility (early or late stages of retirement) is critical and has differing effects on retirement outcomes. The results are robust to varying portfolio allocations to equities although the precise impacts are different.

Keywords: Retirement; Probability of shortfall; Ruin risk; Equity allocation; Volatility (search for similar items in EconPapers)
JEL-codes: D03 G11 G17 J26 J32 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:21:y:2017:i:c:p:201-205

DOI: 10.1016/j.frl.2016.12.011

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