ASMF seminar: Servaas van Bilsen (Tilburg University)

Evenement

'How to Invest and Draw-Down Accumulated Wealth in Retirement? A Utility-Based Analysis'

Abstract 

This paper analyzes the important question of how Baby Boomers should invest and draw-down their accumulated wealth over the rest of their lives. Specifically, we propose and analyze a model with internal multiplicative habit formation and stochastic differential utility, and derive the resulting investment and draw-down strategy in closed-form. We show that the individual adjusts both the level and future growth rates of consumption after a wealth shock, implying gradual response of consumption to financial shocks. Furthermore, we analytically show that consumption has a tendency to grow over time. Finally, we show that the welfare losses associated with various popular investment and draw-down strategies can be large - especially if the individual exhibits a significant degree of internal habit formation.

Host: Roger Laeven

Location

Conference room JK 2.50 

Gepubliceerd door  Economics and Business