The Importance of Joining Lifecycle Models with Mean-Variance Optimization

Paul D. Kaplan and Thomas M. Idzorek

Financial Analysts Journal, 2024, vol. 80, issue 4, 11-17

Abstract: For nearly three-quarters of a century, there has been a large separation between lifecycle finance models stemming from numerous Nobel laureates and the single-period mean-variance optimization-oriented models starting with Markowitz. Recent advances allow for a new class of models that combine both lifecycle models and mean-variance models. This new class of models uses lifecycle models to answer key financial planning questions and then mean-variance optimization models to answer investment questions. Goals-based models are often silent on many financial planning questions addressed by lifecycle finance and should thus be joined with lifecycle models.

Date: 2024
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DOI: 10.1080/0015198X.2024.2382672

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