Retail Financial Innovation and Stock Market Dynamics: The Case of Target Date Funds

Target date funds (TDFs) are designed to provide unsophisticated or inattentive investors with age-appropriate exposures different asset classes like stocks and bonds. The rise of TDFs has moved a significant share retirement into macro-contrarian strategies that sell after relatively good stock market performance. This rebalancing drives contrarian flows across equity mutual held by TDFs, stabilizing their funding, reduces returns for disproportionately these when high. Continued growth in similar investment products may dampen volatility increase the transmission shocks classes. article is protected copyright. All rights reserved