The duration puzzle in life-cycle investment

Lans Bovenberg, Servaas van Bilsen, Ilja Boelaars

Research output: Contribution to journalArticleScientificpeer-review

3 Citations (Scopus)


By analyzing the portfolio allocations of target date funds (TDFs), we document that the observed durations of TDF portfolios are inconsistent with the durations predicted by classical portfolio theory. We call this stylized fact the duration puzzle. We investigate to what extent several extensions of classical portfolio theory can explain the duration puzzle. More specifically, we consider the impact of human capital, inflation risk, and portfolio restrictions on the duration of the optimal portfolio. We find that it is difficult to explain the duration puzzle, especially for individuals aged between 35 and 65 years.
Original languageEnglish
Pages (from-to)1271-1311
Number of pages41
JournalReview of Finance
Issue number6
Publication statusPublished - Nov 2020


  • Life-Cycle Investment
  • Target Date Funds
  • Long-Term Bonds
  • Interest Rate Risk Management


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