Saving for Retirement in Europe: The Long-Term Risk-Return Tradeoff

38 Pages Posted: 27 Apr 2022

See all articles by Andrea Berardi

Andrea Berardi

Ca Foscari University of Venice - Dipartimento di Economia

Claudio Tebaldi

Bocconi University - CAREFIN - Centre for Applied Research in Finance; Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Date Written: April 13, 2022

Abstract

A comparison of the performances of pension products that ignores long-term trends might significantly overestimate the long-term impact of volatility risks while underestimating the impact of persistent, low frequency trends. This paper proposes a comparison making use of projection models based on the long-term risk-return tradeoff proposed by Campbell and Viceira (2005) to explicitly take into account slow moving economic trends. In order to illustrate the approach and its implications, we discuss the capital protection provided by life-cycle target-date fund strategies and minimum guarantee strategies.

Keywords: retirement savings, strategic asset allocation, life-cycle investing, minimum return guarantees, dynamic scenario analyses

JEL Classification: G11, C53, E21, D14

Suggested Citation

Berardi, Andrea and Tebaldi, Claudio, Saving for Retirement in Europe: The Long-Term Risk-Return Tradeoff (April 13, 2022). Available at SSRN: https://ssrn.com/abstract=4082959 or http://dx.doi.org/10.2139/ssrn.4082959

Andrea Berardi (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Claudio Tebaldi

Bocconi University - CAREFIN - Centre for Applied Research in Finance ( email )

Via Roentgen 1
Milan, 20136
Italy

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

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