Applications, limitations and deviations of a multiple-horizon approach in asset allocation

Date

2006-08

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Volume Title

Publisher

Texas Tech University

Abstract

Financial services professionals are in the position of educating and serving the public need for financial planning and retirement planning. Retirement planning is a major component of comprehensive financial planning, especially for people approaching retirement age.

Therefore, this dissertation provides an analysis of appropriate asset composition in retirement portfolios in an effort to aid financial planners to accomplish their missions. To accomplish this, the dissertation presents a Multiple-Horizon Asset Allocation (MHAA) approach in retirement portfolio management and its applications in real world. Moreover, an extension of the MHAA (MHAA-E) approach was introduced to make it more applicable in the real world. This study also tests the MHAA approach with historical data to evaluate how portfolios with 25-year horizon allocated under the MHAA approach would have performed. Portfolios historical performances were also compared vertically among conservative, moderate and aggressive allocations.

The development of the MHAA and the MHAA-E approaches in retirement portfolio management add to the limited literature on asset allocation for retirement portfolio management.

Financial services providers can put these approaches to practical use to assist investment decision making in retirement and investment planning. Financial educators can also use the MHAA and the MHAA-E approaches to educate the general public about theoretical asset allocation in retirement portfolio management.

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