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Human Capital As An Asset Mix And Optimal Life Cycle Portfolio
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Book Synopsis Human Capital as an Asset Mix and Optimal Life-Cycle Portfolio by : Takao Kobayashi
Download or read book Human Capital as an Asset Mix and Optimal Life-Cycle Portfolio written by Takao Kobayashi and published by . This book was released on 2008 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines life-cycle optimal consumption and asset allocation in the presence of human capital. Labor income seems like a money market mutual fund whose balance in one or two years is predictable but a wide dispersion results after many years, reflecting fluctuations in economic conditions. We use the martingale method to derive an analytical solution, finding that Merton's well-known constant-mix strategy is still true after incorporating human capital from the perspective of total wealth management. Moreover, the proportion in risky assets implicit in the agent's human capital is the main factor determining the optimal investment strategy. The numerical examples suggest that young investors should short stocks because their human capital has large market exposure. As they age, however, their human capital becomes bond-like, and thus they have to hold stocks to achieve optimal overall risk exposure.
Book Synopsis Human Capital as Age-Dependent Asset Mix by : Takao Kobayashi
Download or read book Human Capital as Age-Dependent Asset Mix written by Takao Kobayashi and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Lifecycle Investing written by Ian Ayres and published by ReadHowYouWant.com. This book was released on 2010-05 with total page 358 pages. Available in PDF, EPUB and Kindle. Book excerpt: Diversification provides a well-known way of getting something close to a free lunch: by spreading money across different kinds of investments, investors can earn the same return with lower risk (or a much higher return for the same amount of risk). This strategy, introduced nearly fifty years ago, led to such strategies as index funds. What if we were all missing out on another free lunch that’s right under our noses? InLifecycle Investing, Barry Nalebuff and Ian Ayres-two of the most innovative thinkers in business, law, and economics-have developed tools that will allow nearly any investor to diversify their portfolios over time. By using leveraging when young-a controversial idea that sparked hate mail when the authors first floated it in the pages ofForbes-investors of all stripes, from those just starting to plan to those getting ready to retire, can substantially reduce overall risk while improving their returns. InLifecycle Investing, readers will learn How to figure out the level of exposure and leverage that’s right foryou How the Lifecycle Investing strategy would have performed in the historical market Why it will work even if everyone does it Whennotto adopt the Lifecycle Investing strategy Clearly written and backed by rigorous research,Lifecycle Investingpresents a simple but radical idea that will shake up how we think about retirement investing even as it provides a healthier nest egg in a nicely feathered nest.
Book Synopsis Are You a Stock or a Bond? by : Moshe A. Milevsky Ph.D.
Download or read book Are You a Stock or a Bond? written by Moshe A. Milevsky Ph.D. and published by FT Press. This book was released on 2012-09-21 with total page 282 pages. Available in PDF, EPUB and Kindle. Book excerpt: You must be aware of the value, potential return and risk of your own human capital (your job, career and what you do for a living as opposed to stocks and bonds or other investment choices) as well as financial capital and investments to plan a secure future. Human capital is the most valuable asset that you will own over your lifecycle. You need to balance all financial decisions with the characteristics of your human capital. The key trends identified in the first edition of the book namely, the decline of Defined Benefit (DB) pension provision, the continued increase in human longevity and the risk of personal inflation, are as relevant today as they were five years ago. The financial crisis has taught us that all types of capital – human, financial and even social – are key to a secure financial future. If your career has "stock-like" growth and risk characteristics, Milevsky helps you balance your "portfolio" by tilting investments towards safer "bonds." If your job is more secure but offers lower financial upside, you'll learn to tilt your investments towards stocks that compensate for your lower earning potential. Either way, Milevsky shows you how to integrate investments, insurance, annuities, and retirement plans to generate the safe and reliable income you'll need. This Edition's updates include: New 2012 data, charts, figures, and references More coverage of incorporating "human capital" into financial planning Advice reflecting the aftermath of the financial crisis Easier, more usable techniques, and less math!
Book Synopsis The Optimal Accumulation of Human Capital Over the Life Cycle by : John W. Graham
Download or read book The Optimal Accumulation of Human Capital Over the Life Cycle written by John W. Graham and published by . This book was released on 1979 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper summarizes the important contributions of the new life cycle human capital literature and demonstrates that many of these results can be derived more simply than in their original presentations. Within three period discrete-time framework it is demonstrated how the optimal pattern of human capital investment over the life cycle depends upon the choice of the objective function, the life cycle of leisure, and the extent of nonmarket benefits of human capital. The paper offers sufficient conditions for the optimality of a profile of monotonically declining investment activity over the life cycle.
Book Synopsis Strategic Asset Allocation by : John Y. Campbell
Download or read book Strategic Asset Allocation written by John Y. Campbell and published by OUP Oxford. This book was released on 2002-01-03 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Book Synopsis The Impact of Human Capital on Life-Cycle Portfolio Choice by : Ingmar Minderhoud
Download or read book The Impact of Human Capital on Life-Cycle Portfolio Choice written by Ingmar Minderhoud and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the impact of human capital on life-cycle portfolio choice using Dutch data. A distinction is made between the riskless view of human capital as having bond-like characteristics, and the risky conception of future wage income having stock-like properties. As in Benzoni, Collin-Dufresne, and Goldstein (2007) we study the welfare implications of portfolio choice when wage income and dividends are co-integrated. Based on Dutch data our analysis confirms the US results as the preferred equity allocation also shows a hump-shaped pattern.
Book Synopsis Managing Investment Portfolios by : John L. Maginn
Download or read book Managing Investment Portfolios written by John L. Maginn and published by John Wiley & Sons. This book was released on 2010-03-18 with total page 1255 pages. Available in PDF, EPUB and Kindle. Book excerpt: "A rare blend of a well-organized, comprehensive guide to portfolio management and a deep, cutting-edge treatment of the key topics by distinguished authors who have all practiced what they preach. The subtitle, A Dynamic Process, points to the fresh, modern ideas that sparkle throughout this new edition. Just reading Peter Bernstein's thoughtful Foreword can move you forward in your thinking about this critical subject." —Martin L. Leibowitz, Morgan Stanley "Managing Investment Portfolios remains the definitive volume in explaining investment management as a process, providing organization and structure to a complex, multipart set of concepts and procedures. Anyone involved in the management of portfolios will benefit from a careful reading of this new edition." —Charles P. Jones, CFA, Edwin Gill Professor of Finance, College of Management, North Carolina State University
Book Synopsis Human Capital, Asset Allocation, and Life Insurance by : Peng Chen
Download or read book Human Capital, Asset Allocation, and Life Insurance written by Peng Chen and published by . This book was released on 2008 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial planners and advisors increasingly recognize that human capital must be taken into account when building optimal portfolios for individual investors. But human capital is not simply another pre-endowed asset class; it contains a unique mortality risk in the form of the loss of future income and wages in the event of the wage earner's death. Life insurance hedges this mortality risk, so human capital affects both optimal asset allocation and demand for life insurance. Yet, historically, asset allocation and life insurance decisions have been analyzed separately. This article develops a unified framework based on human capital that enables individual investors to make these decisions jointly.
Book Synopsis Financial Investment and Human Capital During Life Cycle by : Anastasios Anastasopoulos
Download or read book Financial Investment and Human Capital During Life Cycle written by Anastasios Anastasopoulos and published by . This book was released on 2018 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores the problem of an agent who invests in financial assets, works and/or accumulates human capital, and retires at the end of time horizon. His/her initial endowments consist of an amount of liquid assets (maybe because of inheritance) and a number of units of human capital.Human capital is measured in efficiency units, as in the theory of growth. By contrast to the theory of growth, efficiency units increase as the result of training and education. Training is a costly activity; in addition to paying educational costs, the agent devotes part of his/her human capital exclusively to education and, thus, he/she can devote less time to earn labour income.The methodology similar to the Kreps-Proteus (KP) and Epstein-Zin (EZ) preferences. The certainty equivalent of life-time utility is evaluated by means of the negative exponential function. In addition, the wealth at the beginning of a period is an anchor point which determines the attitude to risk for that period. The attitude to risk and the utility of wealth evolve over time under the impact of past experiences and the anticipation of future events.Some of the main results are: (i) Optimal policies are linear functions of wealth: the marginal propensities to consume and to invest in financial assets are determined recursively and they are independent of the level of wealth of each period. (ii) The Certainty equivalent (CE) of the portfolio's risk premium is the sum of the CE of the risk premia attached to financial assets and human capital, both expressed per unit of initial wealth of a period. (iii) The attitude to risk is characterized by an intrinsic attitude which is unchanged during the lifetime of the individual. This attitude is modified depending on whether the agent faces dynamic or timeless choices. In the case of dynamic choices, the intrinsic measure is modified by the realization of random events related to past choices. In timeless choices, the atemporal measure allows the agent to evaluate future anticipations under the experiences of the past. (iv) On economic considerations alone, the choice of educational plan at the beginning of the life cycle is either zero, or the maximum possible. It is independent of the measure of risk aversion and depends on other (not specified) personal preference and social conditions.
Book Synopsis Non Tradeable Human Capital and Household Asset Allocation by :
Download or read book Non Tradeable Human Capital and Household Asset Allocation written by and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis is comprised of two essays that investigate household consumption and portfolio choices in dynamic life cycle frameworks. In the first essay, I explain that stock market participation and stockholding are increasing in the level of education and financial wealth without relying on commonly used assumptions about differences in the cost of processing financial information among households. The key aspects of the model are recursive preferences, education attainment and stock market participation. Households with low risk aversion and high elasticity of intertemporal substitution (EIS) are more likely to exercise their education option, accumulate large wealth, invest in stock markets and invest heavily in stocks. These findings are consistent with three separate, but related, strands of the literature on i) household asset holding, ii) utility preferences based on household level financial data, and iii) utility preferences and education attainment. I find that, consistent with these studies, better educated households accumulate more financial wealth, hold a larger fraction of wealth in equity, have a higher EIS and are less risk averse than their less educated counterparts. In the second essay, I investigate the fact that the fraction of financial wealth invested in equity is increasing in financial wealth in the cross section of households, a known fact that contradicts existing theories in the literature. I show that the contemporaneous positive correlation between human capital and financial wealth values is increasing in the persistence of labor income shocks. While human capital and financial wealth independently have opposing direct effects on equity shares, human capital effects dominate if labor income shocks are highly persistent, generating increasing equity shares in financial wealth. Both a simple model and a realistically calibrated life cycle model of consumption and portfolio choice are shown to generate the results. The predictions are s.
Book Synopsis Factor Investing and Asset Allocation: A Business Cycle Perspective by : Vasant Naik
Download or read book Factor Investing and Asset Allocation: A Business Cycle Perspective written by Vasant Naik and published by CFA Institute Research Foundation. This book was released on 2016-12-30 with total page 192 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Human Capital, Social Security, and Asset Allocation by : Gordon Irlam
Download or read book Human Capital, Social Security, and Asset Allocation written by Gordon Irlam and published by . This book was released on 2017 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: A model of labor income that includes volatility is developed based on longitudinal data. Numerical stochastic dynamic programming is then applied to the model to explore the effects of stochastic human capital and Social Security on optimal asset allocation and consumption decisions over the lifecycle for typical individuals. Optimal asset allocations are very stock heavy pre-retirement, and quite stock heavy post retirement. Individuals should adopt declining equity allocations while employed, and level to slightly rising equity allocations during a stochastic duration retirement. Consumption should typically slowly increase until late in retirement, when it will be forced to fall.
Book Synopsis CFA Program Curriculum 2017 Level III, Volumes 1 - 6 by : CFA Institute
Download or read book CFA Program Curriculum 2017 Level III, Volumes 1 - 6 written by CFA Institute and published by John Wiley & Sons. This book was released on 2016-08-01 with total page 2486 pages. Available in PDF, EPUB and Kindle. Book excerpt: Apply CFA Program concepts and skills to real-world wealth and portfolio management for the 2017 exam The same official curricula that CFA Program candidates receive with program registration is now publicly available for purchase. CFA Program Curriculum 2017 Level III, Volumes 1-6 provides complete, authoritative guidance on synthesizing the entire CFA Program Candidate Body of Knowledge (CBOK) into professional practice for the 2017 exam. This book helps you bring together the skills and concepts from Levels I and II to formulate a detailed, professional response to a variety of real-world scenarios. Coverage spans all CFA Program topics and provides a rigorous treatment of portfolio management, all organized into individual study sessions with clearly defined Learning Outcome Statements. Visual aids clarify complex concepts, and practice questions allow you to test your understanding while reinforcing major content areas. Levels I and II equipped you with foundational investment tools and complex analysis skill; now, you'll learn how to effectively synthesize that knowledge to facilitate effective portfolio management and wealth planning. This study set helps you convert your understanding into a professional body of knowledge that will benefit your clients' financial futures. Master essential portfolio management and compliance topics Synthesize your understanding into professional guidance Reinforce your grasp of complex analysis and valuation Apply ethical and professional standards in the context of real-world cases CFA Institute promotes the highest standards of ethics, education, and professional excellence among investment professionals. The CFA Program Curriculum guides you through the breadth of knowledge required to uphold these standards. The three levels of the program build on each other. Level I provides foundational knowledge and teaches the use of investment tools; Level II focuses on application of concepts and analysis, particularly in the valuation of assets; and Level III builds toward synthesis across topics with an emphasis on portfolio management.
Book Synopsis Optimal Patterns of Life Cycle Resource Allocation with Emphasis on the Role of Human Capital in Market and Non-market Production by : Dean Ray Leimer
Download or read book Optimal Patterns of Life Cycle Resource Allocation with Emphasis on the Role of Human Capital in Market and Non-market Production written by Dean Ray Leimer and published by . This book was released on 1974 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Artificial Intelligence in Asset Management by : Söhnke M. Bartram
Download or read book Artificial Intelligence in Asset Management written by Söhnke M. Bartram and published by CFA Institute Research Foundation. This book was released on 2020-08-28 with total page 95 pages. Available in PDF, EPUB and Kindle. Book excerpt: Artificial intelligence (AI) has grown in presence in asset management and has revolutionized the sector in many ways. It has improved portfolio management, trading, and risk management practices by increasing efficiency, accuracy, and compliance. In particular, AI techniques help construct portfolios based on more accurate risk and return forecasts and more complex constraints. Trading algorithms use AI to devise novel trading signals and execute trades with lower transaction costs. AI also improves risk modeling and forecasting by generating insights from new data sources. Finally, robo-advisors owe a large part of their success to AI techniques. Yet the use of AI can also create new risks and challenges, such as those resulting from model opacity, complexity, and reliance on data integrity.
Book Synopsis Human Capital and Household Portfolio Choice by : Kyung Hwan Shim
Download or read book Human Capital and Household Portfolio Choice written by Kyung Hwan Shim and published by . This book was released on 2015 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using longitudinal data from PSID, we show the positive relation between labor income and the equity share of financial wealth is stronger for those who have a higher persistence in shocks to permanent labor income. The results support the hypothesis that the cross sectional variation in persistence captures latent human capital effects on investment decisions, without which the variation in equity share appears to be attributed to variation in financial wealth. The predictions, which are supported empirically, are formulated with a simple model and a realistically calibrated life-cycle model of consumption and portfolio choice with non-tradeable human capital.
