PT  - JOURNAL ARTICLE
AU  - Ganlin Xu
AU  - Harry Markowitz
AU  - John B. Guerard, , Jr.
TI  - Shortfall Risk and Shortfall Duration for Portfolio Choice in Decumulation
AID  - 10.3905/jor.2019.7.1.024
DP  - 2019 Jul 31
TA  - The Journal of Retirement
PG  - 24--34
VI  - 7
IP  - 1
4099  - https://pm-research.com/content/7/1/24.short
4100  - https://pm-research.com/content/7/1/24.full
AB  - The article studies the portfolio selection problem in the retirement phase by using the habit formation utility function in the context of traditional utility maximization. The habit formation utility can be further simplified to a linear combination of shortfall risk and shortfall duration. A retiree who can easily adapt to a new spending level should emphasize shortfall duration whereas a retiree who is rigid in spending should emphasize shortfall risk. The article provides the conditions in which current practitioners favorite choices of shortfall risk, as a criterion to choose retirement portfolios, are consistent with utility maximization.TOPICS: Retirement, wealth management, long-term/retirement investing