Stress Testing Monte Carlo Assumptions

Published in Maurer, R., O. Mitchell, and P. Hammond (Eds.) (2014). Recreating Sustainable Retirement: Resilience, Solvency, and Tail Risk. Oxford, UK: Oxford University Press.

Pension Research Council WP 2013-25

Posted: 8 Oct 2013 Last revised: 3 Apr 2020

Date Written: October 1, 2013

Abstract

Despite the evidence that returns are fat-tailed and that expected returns vary through time, most Monte Carlo simulations assume returns are independent and identically normally distributed. This study incorporates these return patterns in retirement simulations to illustrate how common assumptions about returns impact the output of Monte Carlo simulations.

Suggested Citation

Lee, Marlena I., Stress Testing Monte Carlo Assumptions (October 1, 2013). Published in Maurer, R., O. Mitchell, and P. Hammond (Eds.) (2014). Recreating Sustainable Retirement: Resilience, Solvency, and Tail Risk. Oxford, UK: Oxford University Press., Pension Research Council WP 2013-25, Available at SSRN: https://ssrn.com/abstract=2337179 or http://dx.doi.org/10.2139/ssrn.2337179

Marlena I. Lee (Contact Author)

Dimensional Fund Advisors ( email )

6300 Bee Cave Road, Building One
Austin, TX 78746
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,778
PlumX Metrics