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Investment Decisions in Retirement: The Role of Subjective Expectations
by Marco Angrisani , Michael Hurd and Erik Meijer
WP 2012-274
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- An economic model that allows individuals to have different beliefs about stock market returns than the average of the past 50 years represents individuals’ investment behavior better than a typical "rational" economic model.
- If stock market returns are, on average, as they were in the past 50 years, individuals incur a welfare loss of up to 12%, depending on risk aversion.
- If stock market returns are, on average, as they were in the past 10 years, individuals on average invest near-optimally.
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