Adaptive Distribution Theory

24 Pages Posted: 7 Feb 2017

Date Written: December 1, 2016


The financial services industry has struggled to develop innovative retirement-income solutions. Such solutions are elusive because providers suffer from behavioral biases that blind them to post-retirement changes in risk and psychology, trapping themselves in habitual modes of thought that strangle the imagination needed to see new solutions. This paper reviews the changes in post-retirement risk and psychology that demand new approaches, offers a critique of existing retirement-income solutions, and presents an alternate model called “adaptive distribution theory.” Adaptive distribution theory for retirement-income portfolios redefines risk and captures investor psychology by incorporating key features of prospect theory. Risk and cash flow are addressed by managing the portfolio using acceptable annualized erosion rates and building a buffer of earnings. The ability to see the obvious is a recurring theme and the key to retirement-income solutions.

Keywords: Retirement Income Solutions, Distribution

JEL Classification: G02, G10, G11

Suggested Citation

Sandidge, James, Adaptive Distribution Theory (December 1, 2016). Journal of Investment Consulting, Vol. 17, No. 2, p. 13-33, 2016, Available at SSRN:

James Sandidge (Contact Author)

The Sandidge Group LLC ( email )

Marlboro, NJ 07746
United States

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