In Dirk's recent post
Mean Reversion of Equity Returns and Retirement Planning, he addresses some of the issues related to mean reversion in markets and the impact on retirement planning. I think he hit this one on the head from my personal experience. He says here what I've been thinking and tried unsuccessfully to explain to others:
I've read postings from other researchers who played around with mean reversion in their retirement models until they realized that any risk-reducing effects were swamped by the huge remaining retirement risks. That's one of the reasons I don't bother modeling long-term mean reversion — along with the fact that I don't know if it exists or how powerful it might be, so I'm not sure what I would model.
I believe retirement planners have little to gain by betting that mean reversion exists unless and until research resolves the issue. (The issue has been around for a long time and it could be a thousand years before we have enough data.) There is significantly more downside to incorrectly guessing there is less risk than there is to incorrectly guessing there is more risk.
This saves me a post...
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