Pierluigi Balduzzi

Carroll School of Management
Boston College
330B Fulton Hall
140 Commonwealth Avenue
Chestnut Hill, MA 02467
Tel: 617/552-3976
Fax: 617/552-3985

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Institutional Affiliation: Boston College

NBER Working Papers and Publications

March 2012Heterogeneity in Target-Date Funds: Optimal Risk-Taking or Risk Matching?
with Jonathan Reuter: w17886
Following the Pension Protection Act of 2006, there was a sharp increase in the use of TDFs as default investment options in defined contribution retirement plans. We document large differences in realized TDF returns and risk profiles, even for funds with the same target retirement date. Using fund-level data, we find evidence that this heterogeneity reflects optimal risk-taking by fund families with low market share, especially those entering the market after 2006. Using plan-level data, we find little evidence that 401(k) plan sponsors match the risk profile of the TDFs in their plans to the risks of their companies.

Published: Balduzzi, Pierluigi, and Jonathan Reuter, 2019, “Heterogeneity in Target Date Funds: Strategic Risk-taking or Risk Matching?” Review of Financial Studies 32 (1): 300-337.

December 1997The Central Tendency: A Second Factor in Bond Yields
with Sanjiv Ranjan Das, Silverio Foresi: w6325
We assume that the instantaneous riskless rate reverts towards a central tendency which in turn, is changing stochastically over time. As a result, current short-term rates are not" sufficient to predict future short-term rates movements, as would be the case if the central" tendency was constant. However, since longer-maturity bond prices incorporate information" about the central tendency, longer-maturity bond yields can be used to predict future short-term" rate movements. We develop a two-factor model of the term-structure which implies that a" linear combination of any two rates can be used as a proxy for the central tendency. Based on" this central-tendency proxy, we estimate a model of the one-month rate which performs better" than models which assume the central tendency to be ...

Published: Review of Economics and Statistics, Vol. 80, no. 1 (February 1998): 62-72. citation courtesy of

February 1997Interest Rate Targeting and the Dynamics of Short-Term Rates
with Giuseppe Bertola, Silverio Foresi, Leora Klapper: w5944
We find that in 1989-1996, when U.S. monetary policy tightly targeted overnight fed funds rates, the volatility and persistence of spreads between target and term fed funds levels were larger for longer-maturity loans. We show that such patterns are consistent with an expectational model where target revisions are infrequent and predictable. In our model, the (autoco-) variance of the spreads of term fed funds rates from the target increases with maturity because longer-term rates are more heavily influenced by persistent expectations of future target changes.

Published: Journal of Money Credit and Banking, Vol. 30, issue 1 (February 1998) pp. 26-50 citation courtesy of

April 1993A Model of Target Changes and the Term Structure of Interest Rates
with Giuseppe Bertola, Silverio Foresi: w4347
We explore the effects of official targeting policy on the term-structure of nominal interest rates, adapting relevant insights from theoretical work on "peso problems" to account for realistic infrequency of target changes. Our analysis of daily U.S. interest rates and newly available historical targets provides an interpretation for persistent spreads between short-term money-market rates and overnight fed-funds targets, and for the poor performance of expectations-hypothesis tests: it is the policy-induced component of fed funds dynamics that appears to be erroneously anticipated by the market. Still, allowance for serial correlation in target changes makes it possible to extract from interest-rate data an expected-knoll series which is quite consistent with the assumptions of the model...

Published: Balduzzi, Pierluigi, Giuseppe Bertola and Silvero Foresi. "A Model Of Target Changes And The Term Structure Of Interest Rates," Journal of Monetary Economics, 1997, v39(2,Jul), 223-249. citation courtesy of

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