TY  - JOUR
AU  - Ayres,Ian
AU  - Nalebuff,Barry J.
TI  - Life-cycle Investing and Leverage:  Buying Stock on Margin Can Reduce Retirement Risk
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14094
PY  - 2008
Y2  - June 2008
UR  - http://www.nber.org/papers/w14094
L1  - http://www.nber.org/papers/w14094.pdf
N1  - Author contact info:
Ian Ayres
Yale Law School
P.O. Box 208415
New Haven, CT  06520-8415
Tel: 203/432-7101
Fax: 203/432-8095
E-Mail: ian.ayres@yale.edu

Barry J. Nalebuff
SOM
Yale University, Box 1A
New Haven, CT  06520
E-Mail: barry.nalebuff@yale.edu
AB  - By employing leverage to gain more exposure to stocks when young, individuals can achieve better diversification across time. Using stock data going back to 1871, we show that buying stock on margin when young combined with more conservative investments when older stochastically dominates standard investment strategies?both traditional life-cycle investments and 100%-stock investments. The expected retirement wealth is 90% higher compared to life-cycle funds and 19% higher compared to 100% stock investments. The expected gain would allow workers to retire almost six years earlier or extend their standard of living during retirement by 27 years.
ER  -