TITLE:
Asset Allocation, Time Diversification and Portfolio Optimization for Retirement
AUTHORS:
Kamphol Panyagometh
KEYWORDS:
Asset Allocation, Time Diversification, Portfolio Optimization, Bootstrapping Simulation
JOURNAL NAME:
Technology and Investment,
Vol.2 No.2,
June
3,
2011
ABSTRACT: Using the data of stock, commodity and bond indexes from 2002 to November 2010, this research was carried out by employing Bootstrapping Simulation technique to find an optimal portfolio (portfolio optimization) for retirement, and the effect of diversification based on increased length of investment period (time diversification) with respect to the lengths of retirement investment period and the amounts required for spending after retirement in various occasions. The study analyzed for an optimal allocation of common stock, commodity and government bond to achieve the target rate of return for retirement by minimizing the portfolio risk as measured from the standard deviation. Apart from the standard deviation of the rate of return of the investment portfolio, this study also viewed the risk based on the Value at Risk concept to study the downside risk of the investment portfolio for retirement.