Is the 60-40 Stock-Bond Pension Fund Rule Wise?

Posted: 3 Apr 2011

See all articles by William T. Ziemba

William T. Ziemba

University of British Columbia (UBC) - Sauder School of Business

Date Written: April 2, 2011

Abstract

Pension funds typically suggest the 60-40 stock-bond rule to lower risk as during stock market declines bonds tend to rise. However, US investment returns have been presidential party dependent; and returns in the last two years of all administrations exceed those in the first two years. The strategies small cap stocks with Democrats and intermediate bonds or large cap stocks with Republicans yields final wealth about six times the large cap index, 50% more than small caps and more than twenty times the 60-40 mix since 1942.

Keywords: small cap, election cycle, 60-40 rule

JEL Classification: G11, G12, G23

Suggested Citation

Ziemba, William T., Is the 60-40 Stock-Bond Pension Fund Rule Wise? (April 2, 2011). Available at SSRN: https://ssrn.com/abstract=1801399 or http://dx.doi.org/10.2139/ssrn.1801399

William T. Ziemba (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-261-1343 (Phone)
604-263-9572 (Fax)

HOME PAGE: http://williamtziemba.com

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,144
PlumX Metrics