Imperial College London
Alternate

Alexander Michaelides

Business School

Professor of Finance
 
 
 
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Contact

 

a.michaelides Website CV

 
 
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Location

 

1.06B53 Prince's GateSouth Kensington Campus

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Summary

 

Publications

Citation

BibTex format

@article{Michaelides:2017:10.1017/S0022109017000357,
author = {Michaelides, A and Zhang, Y},
doi = {10.1017/S0022109017000357},
journal = {Journal of Financial and Quantitative Analysis},
pages = {1183--1209},
title = {Stock market mean reversion and portfolio choice over the life cycle},
url = {http://dx.doi.org/10.1017/S0022109017000357},
volume = {52},
year = {2017}
}
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RIS format (EndNote, RefMan)

TY  - JOUR
AB  - We solve for optimal consumption and portfolio choice in a life-cycle model with short-sales and borrowing constraints; undiversifiable labor income risk; and a predictable, time-varying, equity premium and show that the investor pursues aggressive market timing strategies. Importantly, in the presence of stock market predictability, the model suggests that the conventional financial advice of reducing stock market exposure as retirement approaches is correct on average, but ignoring changing market information can lead to substantial welfare losses. Therefore, enhanced target-date funds (ETDFs) that condition on expected equity premia increase welfare relative to target-date funds (TDFs). Out-of-sample analysis supports these conclusions.
AU  - Michaelides,A
AU  - Zhang,Y
DO  - 10.1017/S0022109017000357
EP  - 1209
PY  - 2017///
SN  - 0022-1090
SP  - 1183
TI  - Stock market mean reversion and portfolio choice over the life cycle
T2  - Journal of Financial and Quantitative Analysis
UR  - http://dx.doi.org/10.1017/S0022109017000357
UR  - http://hdl.handle.net/10044/1/27733
VL  - 52
ER  -
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