Lifetime Financial Advice: Human Capital, Asset Allocation, and Insurance
Lifetime Financial Advice: Human Capital, Asset Allocation, and Insurance By Roger G. Ibbotson; Moshe A. Milevsky; Peng Chen; and Kevin X. Zhu
2007 | 103 Pages | ISBN: 0943205948 | PDF | 1 MB
2007 | 103 Pages | ISBN: 0943205948 | PDF | 1 MB
In determining asset allocation, individuals must consider more than the risk-return trade-off of financial assets. They must take into account human capital and mortality risk in the earlier life-cycle stages and longevity risk in the later life-cycle stages. The authors show how to integrate these factors into individual investors' asset allocations through a systematic joint analysis of the life insurance a family needs to protect human capital and how to allocate the family's financial capital. The proposed life-cycle model then addresses the transition from the accumulation to the saving phases-in particular, the role (if any) of immediate payout annuities.