Some important differences in their research approach which is driving the conclusion:We challenge two central tenets of lifecycle investing: (i) investors should diversify across
stocks and bonds and (ii) the young should hold more stocks than the old. An even mix of
50% domestic stocks and 50% international stocks held throughout one’s lifetime vastly outper-
forms age-based, stock-bond strategies in building wealth, supporting retirement consumption,
preserving capital, and generating bequests. These findings are based on a lifecycle model that
features dynamic processes for labor earnings, Social Security benefits, and mortality and cap-
tures the salient time-series and cross-sectional properties of long-horizon asset class returns.
Given the sheer magnitude of US retirement savings, we estimate that Americans could realize
trillions of dollars in welfare gains by adopting the all-equity strategy.
There's also a recent podcast from Rational Reminder where they talk about this paper: "Episode 281: Lifecycle Asset Allocation, and Retiring Successfully with Justin King" https://rationalreminder.ca/podcast/281We find that Stocks/I dominates despite its violation of the central tenets of lifecycle investing
that investors should diversify across stocks and bonds and use age-based strategies. Two aspects
of our methods matter for strategy evaluation. First, our simulation approach maintains time-series
and cross-sectional dependencies in asset class returns. We specifically employ a stationary block
bootstrap [Politis and Romano (1994)] with a long average block length of 120 months to preserve
long-term return dependencies. This technique contrasts with the common approaches of assuming
independent and identically distributed (IID) returns or relying on moments of short-term (e.g.,
monthly or annual) returns to study lifecycle investing. Second, we use a comprehensive dataset of
developed country returns to overcome the small sample problem posed by US data. We find that a
bootstrap simulation that uses US return data and assumes IID returns generates a sharply different
conclusion about retirement saving. Under the US-IID method, age-based strategies that diversify
across stocks and bonds appear favorable relative to Stocks/I for retirement savers for whom capital
preservation in retirement is important. Moving away from either of these two assumptions — i.e.,
acknowledging that returns are not IID or that the US sample presents a severe small sample
problem for long-horizon asset performance — restores our conclusion that Stocks/I dominates.
I found its findings somewhat surprising and very applicable to the many investors on this forum trying to choose the right asset allocation for their retirement portfolio.
Link to the paper
https://www.netspar.nl/assets/uploads/1 ... script.pdf
Looks like there is indeed a secondary discussion on this paper via a morningstar article already.
https://bogleheads.org/forum/viewtopic. ... 1&start=50
And a reddit thread
https://www.reddit.com/r/Bogleheads/com ... er_on_100/