Does retirement flexibility provide a hedge against macroeconomics risks?

Y. Adema, J. Bonenkamp, Lex Meijdam

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Retirement flexibility is often seen as a hedge against macroeconomic risks such as capital market risks, which justifies more risky asset portfolios. This paper analyses the robustness of this claim in both a partial equilibrium and general equilibrium setting. We show that this positive relationship between risk taking and retirement flexibility is weakened and under some conditions even turned around if not only capital market risks, but also productivity risks are considered. Productivity risk in combination with a high elasticity of substitution between consumption and leisure creates a positive correlation between asset returns and labour income, reducing the willingness of consumers to bear risk.
Original languageEnglish
Pages (from-to)1-22
JournalJournal of Pension Economics and Finance
Volume17
Issue number1
DOIs
Publication statusPublished - Jan 2018

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Hedge
Macroeconomics
Retirement
Productivity
Capital markets
Market risk
Leisure
General equilibrium
Elasticity of substitution
Willingness
Partial equilibrium
Asset returns
Assets
Labor income
Risk taking
Robustness

Keywords

  • retirement (in)flexibility
  • portfolio choice
  • general equilibrium
  • intratemporal substitution elasticity

Cite this

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Does retirement flexibility provide a hedge against macroeconomics risks? / Adema, Y.; Bonenkamp, J.; Meijdam, Lex.

In: Journal of Pension Economics and Finance, Vol. 17, No. 1, 01.2018, p. 1-22.

Research output: Contribution to journalArticleScientificpeer-review

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