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Life Cycle Asset Allocation And Unemployment Risk
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Book Synopsis Life-Cycle Asset Allocation and Unemployment Risk by : Fabio C. Bagliano
Download or read book Life-Cycle Asset Allocation and Unemployment Risk written by Fabio C. Bagliano and published by . This book was released on 2016 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we extend the traditional life cycle model of saving and portfolio choice to allow for possible long-term unemployment spells to have permanent effects on subsequent labor income prospects. The risk of losing future labor income could imply strong human capital erosion for the investor at any age, dampening the incentive to invest in risky stocks. The resulting optimal portfolio share invested in stocks may be relatively flat in age, more in line with the available evidence and contrary to the predictions of traditional life-cycle models.
Book Synopsis Investing Over the Life Cycle with Long-Run Labor Income Risk by : Luca Benzoni
Download or read book Investing Over the Life Cycle with Long-Run Labor Income Risk written by Luca Benzoni and published by . This book was released on 2010-02 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many financial advisors and much of the academic literature often argue that young people should place most of their savings in stocks. In contrast, a significant fraction of U.S. households do not hold stocks. Investors typically hold very little in stocks when they are young, progressively increase their holdings as they age, and decrease their exposure to stock market risk when they approach retirement. The authors show how long-run labor income risk helps explain this evidence. Moreover, they discuss the effect of long-run labor income risk on the valuation of pension plan obligations, their funding, and the allocation of pension assets across different investment classes. figures.
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 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 Lifecycle Asset Allocation Strategies and the Distribution of 401(K) Retirement Wealth by : James M. Poterba
Download or read book Lifecycle Asset Allocation Strategies and the Distribution of 401(K) Retirement Wealth written by James M. Poterba and published by . This book was released on 2010 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines how different asset allocation strategies over the course of a worker's career affect the distribution of retirement wealth and the expected utility of wealth at retirement. It considers both rules that allocate a constant portfolio fraction to various assets at all ages, as well as quot;lifecyclequot; rules that vary the mix of portfolio assets as the worker ages. The analysis simulates retirement wealth using asset returns that are drawn from the historical return distribution. The results suggest that the distribution of retirement wealth associated with typical lifecycle investment strategies is similar to that from age-invariant asset allocation strategies that set the equity share of the portfolio equal to the average equity share in the lifecycle strategies. There is substantial variation across workers with different characteristics in the expected utility from following different asset allocation strategies. The expected utility associated with different 401(k) asset allocation strategies, and the ranking of these strategies, is very sensitive to three parameters: the expected return on corporate stock, the worker's relative risk aversion, and the amount of non-401(k) wealth that the worker will have available at retirement. At modest levels of risk aversion, or in the presence of substantial non-401(k) wealth at retirement, the historical pattern of stock and bond returns implies that the expected utility of an all-stock investment allocation rule is greater than that from any of the more conservative strategies. Higher risk aversion or lower expected returns on stocks raise the expected utility of following lifecycle strategies or other strategies that reduce equity exposure throughout the lifetime.
Book Synopsis The Portfolio Size Effect and Lifecycle Asset Allocation Funds by : Wade D. Pfau
Download or read book The Portfolio Size Effect and Lifecycle Asset Allocation Funds written by Wade D. Pfau and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Basu and Drew (in the JPM Spring 2009 issue) argue that lifecycle asset allocation strategies are counterproductive to the retirement savings goals of typical individual investors. Because of the portfolio size effect, most portfolio growth will occur in the years just before retirement when lifecycle funds have already switched to a more conservative asset allocation. In this article, we use the same methodology as Basu and Drew, but we do not share their conclusion that the portfolio size effect soundly overturns the justification for the lifecycle asset allocation strategy. While strategies that maintain a large allocation to stocks do provide many attractive features, we aim to demonstrate that a case for supporting a lifecycle strategy can still be made with modest assumptions for risk aversion and diminishing utility from wealth. Our differing conclusion results from four factors: (1) we compare the interactions between different strategies; (2) we consider a more realistic example for the lifecycle asset allocation strategy; (3) we examine the results for 17 countries; and (4) we provide an expected utility framework to compare different strategies. We find that with a very reasonable degree of risk aversion, investors have reason to prefer the lifecycle strategy in spite of the portfolio size effect.
Book Synopsis Life-Cycle Asset Allocation with Annuity Markets by : Wolfram J. Horneff
Download or read book Life-Cycle Asset Allocation with Annuity Markets written by Wolfram J. Horneff and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive the optimal portfolio choice over the life-cycle for households facing labor income, capital market, and mortality risk. In addition to stocks and bonds, households also have access to incomplete annuity markets offering a hedge against mortality risk. We show that a considerable fraction of wealth should be annuitized to skim the return enhancing mortality credit. The remaining liquid wealth (stocks and bonds) is used to hedge labor income risk during work life, to earn the equity premium, and to ensure estate for the heirs. Furthermore, we assess the importance of common explanations for limited participation in annuity markets.
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 Handbook of the Economics of Finance by : G. Constantinides
Download or read book Handbook of the Economics of Finance written by G. Constantinides and published by Elsevier. This book was released on 2003-11-04 with total page 698 pages. Available in PDF, EPUB and Kindle. Book excerpt: Arbitrage, State Prices and Portfolio Theory / Philip h. Dybvig and Stephen a. Ross / - Intertemporal Asset Pricing Theory / Darrell Duffle / - Tests of Multifactor Pricing Models, Volatility Bounds and Portfolio Performance / Wayne E. Ferson / - Consumption-Based Asset Pricing / John y Campbell / - The Equity Premium in Retrospect / Rainish Mehra and Edward c. Prescott / - Anomalies and Market Efficiency / William Schwert / - Are Financial Assets Priced Locally or Globally? / G. Andrew Karolyi and Rene M. Stuli / - Microstructure and Asset Pricing / David Easley and Maureen O'hara / - A Survey of Behavioral Finance / Nicholas Barberis and Richard Thaler / - Derivatives / Robert E. Whaley / - Fixed-Income Pricing / Qiang Dai and Kenneth J. Singleton.
Book Synopsis Reshaping Retirement Security by : Raimond Maurer
Download or read book Reshaping Retirement Security written by Raimond Maurer and published by Oxford University Press on Demand. This book was released on 2012-09-27 with total page 312 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book explores the lessons to be learnt for retirement planning and long-term financial security in view of the massive shocks to stock markets, labour markets, and pension plans caused by the financial crisis. It aims to rethink the resilience of defined contribution plans and how defined benefit plans reacted to the financial crisis.
Author :National Academies of Sciences, Engineering, and Medicine Publisher :National Academies Press ISBN 13 :0309452961 Total Pages :583 pages Book Rating :4.3/5 (94 download)
Book Synopsis Communities in Action by : National Academies of Sciences, Engineering, and Medicine
Download or read book Communities in Action written by National Academies of Sciences, Engineering, and Medicine and published by National Academies Press. This book was released on 2017-04-27 with total page 583 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the United States, some populations suffer from far greater disparities in health than others. Those disparities are caused not only by fundamental differences in health status across segments of the population, but also because of inequities in factors that impact health status, so-called determinants of health. Only part of an individual's health status depends on his or her behavior and choice; community-wide problems like poverty, unemployment, poor education, inadequate housing, poor public transportation, interpersonal violence, and decaying neighborhoods also contribute to health inequities, as well as the historic and ongoing interplay of structures, policies, and norms that shape lives. When these factors are not optimal in a community, it does not mean they are intractable: such inequities can be mitigated by social policies that can shape health in powerful ways. Communities in Action: Pathways to Health Equity seeks to delineate the causes of and the solutions to health inequities in the United States. This report focuses on what communities can do to promote health equity, what actions are needed by the many and varied stakeholders that are part of communities or support them, as well as the root causes and structural barriers that need to be overcome.
Book Synopsis Evaluating the Financial Performance of Pension Funds by : Richard Hinz
Download or read book Evaluating the Financial Performance of Pension Funds written by Richard Hinz and published by World Bank Publications. This book was released on 2010-01-14 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt: Countries around the world are increasingly relying on individual pension savings accounts to provide income in old age for their citizens. Although these funds have now been in place for several decades, their performance is usually measured using methods that are not meaningful in relation to this long-term objective. The recent global financial crisis has highlighted the need to develop better performance evaluation methods that are consistent with the retirement income objective of pension funds. Compiling research derived from a partnership among the World Bank, the Organisation for Economic Co-operation and Development (OECD), and three private partners, 'Evaluating the Financial Performance of Pension Funds' discusses the theoretical basis and key implementation issues related to the design of performance benchmarks based on life-cycle savings and investment principles. The book begins with an evaluation of the financial performance of funded pension systems using the standard mean variance framework. It then provides a discussion of the limitations inherent to applying these methods to pension funds and outlines the many other issues that should be addressed in developing more useful and meaningful performance measures through the formulation of pension-specific benchmark portfolios. Practical implementation issues are addressed through empirical examples of how such benchmarks could be developed. The book concludes with commentary and observations from several noted pension experts about the need for a new approach to performance measurement and the impact of the recent global financial crisis on pension funds.
Download or read book Hedge Fund Activism written by Alon Brav and published by Now Publishers Inc. This book was released on 2010 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hedge Fund Activism begins with a brief outline of the research literature and describes datasets on hedge fund activism.
Book Synopsis Portfolio Selection and Asset Pricing by : Shouyang Wang
Download or read book Portfolio Selection and Asset Pricing written by Shouyang Wang and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt: In our daily life, almost every family owns a portfolio of assets. This portfolio could contain real assets such as a car, or a house, as well as financial assets such as stocks, bonds or futures. Portfolio theory deals with how to form a satisfied portfolio among an enormous number of assets. Originally proposed by H. Markowtiz in 1952, the mean-variance methodology for portfolio optimization has been central to the research activities in this area and has served as a basis for the development of modem financial theory during the past four decades. Follow-on work with this approach has born much fruit for this field of study. Among all those research fruits, the most important is the capital asset pricing model (CAPM) proposed by Sharpe in 1964. This model greatly simplifies the input for portfolio selection and makes the mean-variance methodology into a practical application. Consequently, lots of models were proposed to price the capital assets. In this book, some of the most important progresses in portfolio theory are surveyed and a few new models for portfolio selection are presented. Models for asset pricing are illustrated and the empirical tests of CAPM for China's stock markets are made. The first chapter surveys ideas and principles of modeling the investment decision process of economic agents. It starts with the Markowitz criteria of formulating return and risk as mean and variance and then looks into other related criteria which are based on probability assumptions on future prices of securities.
Book Synopsis Powering the Digital Economy: Opportunities and Risks of Artificial Intelligence in Finance by : El Bachir Boukherouaa
Download or read book Powering the Digital Economy: Opportunities and Risks of Artificial Intelligence in Finance written by El Bachir Boukherouaa and published by International Monetary Fund. This book was released on 2021-10-22 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the impact of the rapid adoption of artificial intelligence (AI) and machine learning (ML) in the financial sector. It highlights the benefits these technologies bring in terms of financial deepening and efficiency, while raising concerns about its potential in widening the digital divide between advanced and developing economies. The paper advances the discussion on the impact of this technology by distilling and categorizing the unique risks that it could pose to the integrity and stability of the financial system, policy challenges, and potential regulatory approaches. The evolving nature of this technology and its application in finance means that the full extent of its strengths and weaknesses is yet to be fully understood. Given the risk of unexpected pitfalls, countries will need to strengthen prudential oversight.
Book Synopsis Strategic Financial Planning Over the Lifecycle by : Narat Charupat
Download or read book Strategic Financial Planning Over the Lifecycle written by Narat Charupat and published by Cambridge University Press. This book was released on 2012-05-28 with total page 383 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a final-year college level textbook on personal finance, jointly written by business school and mathematics professors. It is aimed at a wide audience of people who are interested in wealth management from a more rigorous perspective. It may be used in both personal applications and professional classrooms.
Book Synopsis Portfolio Selection Using Multi-Objective Optimisation by : Saurabh Agarwal
Download or read book Portfolio Selection Using Multi-Objective Optimisation written by Saurabh Agarwal and published by Springer. This book was released on 2017-08-21 with total page 240 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book explores the risk-return paradox in portfolio selection by incorporating multi-objective criteria. Empirical research is presented on the development of alternate portfolio models and their relative performance in the risk/return framework to provide solutions to multi-objective optimization. Next to outlining techniques for undertaking individual investor’s profiling and portfolio programming, it also offers a new and practical approach for multi-objective portfolio optimization. This book will be of interest to Foreign Institutional Investors (FIIs), Mutual Funds, investors, and researchers and students in the field.
