Aging Population, Retirement, and Risk Taking: Reply

In theorem 1 given in my paper, “Aging Population, Retirement, and Risk Taking” [Levy H (2016a) Aging population, retirement, and risk taking. Management Sci. 62(5):1415–1430.], there is indeed a technical error. Yet, adding one condition to the theorem (which can be added in two alternate ways) is sufficient to ensure the dominance of stocks over bonds in the very long run. For the commonly employed preferences, the empirical evidence conforms with the claim given in my original theorem 1, asserting that the portfolio with the higher geometric mean (stocks) dominates the other portfolio under consideration (bonds) as the investment horizon increases indefinitely. Thus, as advocated in my paper, stocks dominate bonds for investors with typical preferences who save for retirement.

This paper was accepted by Karl Deither, finance.