Analysing the c-minus-age strategy for life-cycle investing

Christine Lai and Tsung-Chyan Lai

Applied Economics Letters, 2009, vol. 16, issue 7, 711-718

Abstract: The c-minus-age strategy is a popular strategy for life-cycle investing. When applying the c-minus-age strategy, an investor first chooses an indirect preference parameter c and at age t will hold a percentage of c minus t in equity assets. In this article, we use a linear and a multiplicative mean-variance utility function to quantitatively analyse the term structure of the mean-variance tradeoffs implied by the c-minus-age strategy. We also provide an optimal procedure to determine c, based on the two direct preference parameters, elicited from an investor, of a multiplicative mean-variance utility function.

Date: 2009
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DOI: 10.1080/13504850701221758

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