This article informs investors on the choice between value and growth mutual funds. The well- established value premium demonstrates that, on average, value securities outperform growth secu- rities, suggesting that an investor may be wise to choose value funds. Extant studies, however, suggest that growth funds outperform value funds. We show that value funds indeed outperform growth funds especially in terms of lower realized risk and higher realized terminal wealth, leading us to recom- mend value funds over growth funds. We argue that previous findings result from a bias against value in some multifactor models.
{"title":"Choosing between value and growth in mutual fund investing","authors":"Glenn N. Pettengill, George Chang, James Hueng","doi":"10.61190/fsr.v23i4.3206","DOIUrl":"https://doi.org/10.61190/fsr.v23i4.3206","url":null,"abstract":"\u0000 \u0000 \u0000This article informs investors on the choice between value and growth mutual funds. The well- established value premium demonstrates that, on average, value securities outperform growth secu- rities, suggesting that an investor may be wise to choose value funds. Extant studies, however, suggest that growth funds outperform value funds. We show that value funds indeed outperform growth funds especially in terms of lower realized risk and higher realized terminal wealth, leading us to recom- mend value funds over growth funds. We argue that previous findings result from a bias against value in some multifactor models. \u0000 \u0000 \u0000","PeriodicalId":100530,"journal":{"name":"Financial Services Review","volume":"18 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77745331","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The baby boomers represent a large percentage of the U.S. population and their preparation for retirement, or lack thereof, can affect the economy at large. In light of the 2008 financial crisis, boomer households may be delaying retirement, choosing to work longer. Using the 2004 and 2010 Survey of Consumer Finance, logistic regression analyses are used to examine life insurance adequacy among boomers before and after the financial crisis of 2008. We find a significant difference in 2010 between the baby boomers and the senior generation in life insurance adequacy. Variables related to net worth, such as income, marital status, and self-insurability, were significant predictors of life insurance adequacy. Given greater life insurance adequacy among those with higher income, increasing group term insurance may help mid to low income households. Further implications to practitioners, agents, and educators are discussed.
{"title":"Boomers’ life insurance adequacy pre & post the 2008 financial crisis","authors":"Janine K. Scott, John R. Gilliam","doi":"10.61190/fsr.v23i4.3203","DOIUrl":"https://doi.org/10.61190/fsr.v23i4.3203","url":null,"abstract":"\u0000 \u0000 \u0000The baby boomers represent a large percentage of the U.S. population and their preparation for retirement, or lack thereof, can affect the economy at large. In light of the 2008 financial crisis, boomer households may be delaying retirement, choosing to work longer. Using the 2004 and 2010 Survey of Consumer Finance, logistic regression analyses are used to examine life insurance adequacy among boomers before and after the financial crisis of 2008. We find a significant difference in 2010 between the baby boomers and the senior generation in life insurance adequacy. Variables related to net worth, such as income, marital status, and self-insurability, were significant predictors of life insurance adequacy. Given greater life insurance adequacy among those with higher income, increasing group term insurance may help mid to low income households. Further implications to practitioners, agents, and educators are discussed. \u0000 \u0000 \u0000","PeriodicalId":100530,"journal":{"name":"Financial Services Review","volume":"148 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77458107","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Bhanu Balasubramnian, Eric R. Brisker, Suzanne M. Gradisher
Using the 2009 National Financial Capability Survey, we identify demographic characteristics associated with financial adviser users who conduct adviser background checks and/or consider more than one adviser before making a choice, and if these activities improve their trust in financial advisers. We find that very few financial adviser users check backgrounds, but there is a positive relationship between adviser background checks and trust levels. Overall, these findings indicate that having a reliable background check system in place, allowing financial consumers to conduct adviser background checks in an easy and efficient manner, will help improve trust in financial advisers.
{"title":"Financial adviser background checks","authors":"Bhanu Balasubramnian, Eric R. Brisker, Suzanne M. Gradisher","doi":"10.61190/fsr.v23i4.3204","DOIUrl":"https://doi.org/10.61190/fsr.v23i4.3204","url":null,"abstract":"\u0000 \u0000 \u0000Using the 2009 National Financial Capability Survey, we identify demographic characteristics associated with financial adviser users who conduct adviser background checks and/or consider more than one adviser before making a choice, and if these activities improve their trust in financial advisers. We find that very few financial adviser users check backgrounds, but there is a positive relationship between adviser background checks and trust levels. Overall, these findings indicate that having a reliable background check system in place, allowing financial consumers to conduct adviser background checks in an easy and efficient manner, will help improve trust in financial advisers. \u0000 \u0000 \u0000","PeriodicalId":100530,"journal":{"name":"Financial Services Review","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89366171","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The United States has a unified system that taxes transfers of property during an individual’s lifetime (gifts) and property transferred as a result of the individual’s death. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act) contains a provision that will allow the unused portion of a decedent’s exclusion (taxable estate protected by the unified credit) to be used upon the subsequent death of the surviving spouse. The portability election is simple for situations where it appears the surviving spouse will not remarry, however, becomes much more complicated if the surviving spouse should remarry.
{"title":"Using the new portability election of deceased spouses","authors":"De'Arno De'Armond, D. Pulliam, R. Patterson","doi":"10.61190/fsr.v23i3.3199","DOIUrl":"https://doi.org/10.61190/fsr.v23i3.3199","url":null,"abstract":"\u0000 \u0000 \u0000The United States has a unified system that taxes transfers of property during an individual’s lifetime (gifts) and property transferred as a result of the individual’s death. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act) contains a provision that will allow the unused portion of a decedent’s exclusion (taxable estate protected by the unified credit) to be used upon the subsequent death of the surviving spouse. The portability election is simple for situations where it appears the surviving spouse will not remarry, however, becomes much more complicated if the surviving spouse should remarry. \u0000 \u0000 \u0000","PeriodicalId":100530,"journal":{"name":"Financial Services Review","volume":"84 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83429822","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Women in the United States face numerous financial challenges: They typically earn less than men do; they have greater probabilities of living in poverty; and they need substantial retirement funds, given their average longevity. Consequently, a comprehensive understanding of how women use investment advice to remedy these challenges is vital. However, the literature is largely mute on this issue. This study helps to fill this gap in the literature by evaluating two profiles of female investors through cluster analysis and logistic regression conducted on a large, nationally representative database collected recently. Predictors of seeking investment advice vary considerably across profiles.
{"title":"Investor profiles","authors":"Kathryn Simms","doi":"10.61190/fsr.v23i3.3200","DOIUrl":"https://doi.org/10.61190/fsr.v23i3.3200","url":null,"abstract":"\u0000 \u0000 \u0000Women in the United States face numerous financial challenges: They typically earn less than men do; they have greater probabilities of living in poverty; and they need substantial retirement funds, given their average longevity. Consequently, a comprehensive understanding of how women use investment advice to remedy these challenges is vital. However, the literature is largely mute on this issue. This study helps to fill this gap in the literature by evaluating two profiles of female investors through cluster analysis and logistic regression conducted on a large, nationally representative database collected recently. Predictors of seeking investment advice vary considerably across profiles. \u0000 \u0000 \u0000","PeriodicalId":100530,"journal":{"name":"Financial Services Review","volume":"10 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80955057","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Turbulent economic and financial times require investors and financial planners to investigate new ways to handle the goal of wealth maximization. This article investigates passive investment strategies that use inverse or leveraged equity exchanged-traded funds (ETFs) in their asset allocation, and quantifies the long-term impact on portfolio performance for the purpose of improving the risk-reward tradeoff. Monte Carlo simulations are used, drawing samples from distributions created by two distinct time periods of historical daily market returns. The findings suggest that, whereas these products are generally not recommended within long-term passive investment strategies, potential diversification benefits exist, dependent on the behavior of equity and debt markets. These findings could materially alter long-term passive portfolio construction methods currently in use by financial planners and individual investors seeking potential diversification benefits using ETFs.
{"title":"Portfolio performance with inverse and leveraged ETFs","authors":"J. DiLellio, R. Hesse, D. J. Stanley","doi":"10.61190/fsr.v23i2.3131","DOIUrl":"https://doi.org/10.61190/fsr.v23i2.3131","url":null,"abstract":"Turbulent economic and financial times require investors and financial planners to investigate new ways to handle the goal of wealth maximization. This article investigates passive investment strategies that use inverse or leveraged equity exchanged-traded funds (ETFs) in their asset allocation, and quantifies the long-term impact on portfolio performance for the purpose of improving the risk-reward tradeoff. Monte Carlo simulations are used, drawing samples from distributions created by two distinct time periods of historical daily market returns. The findings suggest that, whereas these products are generally not recommended within long-term passive investment strategies, potential diversification benefits exist, dependent on the behavior of equity and debt markets. These findings could materially alter long-term passive portfolio construction methods currently in use by financial planners and individual investors seeking potential diversification benefits using ETFs.","PeriodicalId":100530,"journal":{"name":"Financial Services Review","volume":"42 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90270662","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Francisca M. Beer, James P. Estes, Charlotte Deshayes
This article explores the risk and return characteristics of socially responsible investment and faith-based mutual funds before and after the market crisis of 2008. Findings show a high level of correlation between the indices studied as well as a higher volatility than the S&P 500. We also find a significant shift in the mix of performance and volatility of these funds before and after the crash of 2008. This is an important consideration for both planners and investors in making an informed decision that is tempered by both the intensity of their social or faith based investment preferences and resultant risk and return on those investments.
{"title":"performance of the faith and ethical investment products","authors":"Francisca M. Beer, James P. Estes, Charlotte Deshayes","doi":"10.61190/fsr.v23i2.3133","DOIUrl":"https://doi.org/10.61190/fsr.v23i2.3133","url":null,"abstract":"This article explores the risk and return characteristics of socially responsible investment and faith-based mutual funds before and after the market crisis of 2008. Findings show a high level of correlation between the indices studied as well as a higher volatility than the S&P 500. We also find a significant shift in the mix of performance and volatility of these funds before and after the crash of 2008. This is an important consideration for both planners and investors in making an informed decision that is tempered by both the intensity of their social or faith based investment preferences and resultant risk and return on those investments.","PeriodicalId":100530,"journal":{"name":"Financial Services Review","volume":"49 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75755947","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Rosita P. Chang, David L. Hunter, Qianqiu Liu, Helen Saar
We evaluate the fit of target-date funds (TDFs) as the main retirement savings instrument for the utility-maximizing investor who becomes more risk averse as she gets older. Using bootstrapping simulations, we show that TDFs can provide higher expected utility than the alternative lifestyle strategies. With loss aversion incorporated in the model, we still find that the optimal lifecycle strategy over time leads to higher expected utility than the best lifestyle strategy. Therefore, TDFs are preferable to the utility-maximizing investor. However, lifecycle strategies are not one-size-fits-all solution and investor’s risk tolerance has to be considered when selecting TDF funds.
{"title":"Saving for retirement while having more nights with peaceful sleep","authors":"Rosita P. Chang, David L. Hunter, Qianqiu Liu, Helen Saar","doi":"10.61190/fsr.v23i2.3132","DOIUrl":"https://doi.org/10.61190/fsr.v23i2.3132","url":null,"abstract":"We evaluate the fit of target-date funds (TDFs) as the main retirement savings instrument for the utility-maximizing investor who becomes more risk averse as she gets older. Using bootstrapping simulations, we show that TDFs can provide higher expected utility than the alternative lifestyle strategies. With loss aversion incorporated in the model, we still find that the optimal lifecycle strategy over time leads to higher expected utility than the best lifestyle strategy. Therefore, TDFs are preferable to the utility-maximizing investor. However, lifecycle strategies are not one-size-fits-all solution and investor’s risk tolerance has to be considered when selecting TDF funds.","PeriodicalId":100530,"journal":{"name":"Financial Services Review","volume":"3 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72672728","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article examines the ability of consumer sentiment for different age groups to forecast short-term as well as long-term equity returns. Using a long-horizon asymmetric response regression format, we show that negative changes in sentiment have a greater influence on stock returns than positive changes in sentiment. Our findings are supportive of the prospect theory. However, we observe that younger individuals appear to be less risk-averse than older individuals. We provide evidence that reminds individual investors and financial planners that risk is an important consider- ation when investing, and that demographic characteristics matter when determining appropriate investing approaches and risk tolerance.
{"title":"Downside risk","authors":"M. Johnson, Atsuyuki Naka","doi":"10.61190/fsr.v23i1.3185","DOIUrl":"https://doi.org/10.61190/fsr.v23i1.3185","url":null,"abstract":"\u0000 \u0000 \u0000This article examines the ability of consumer sentiment for different age groups to forecast short-term as well as long-term equity returns. Using a long-horizon asymmetric response regression format, we show that negative changes in sentiment have a greater influence on stock returns than positive changes in sentiment. Our findings are supportive of the prospect theory. However, we observe that younger individuals appear to be less risk-averse than older individuals. We provide evidence that reminds individual investors and financial planners that risk is an important consider- ation when investing, and that demographic characteristics matter when determining appropriate investing approaches and risk tolerance. \u0000 \u0000 \u0000","PeriodicalId":100530,"journal":{"name":"Financial Services Review","volume":"87 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81978606","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study investigates the financial literacy of low-income employees, by examining their financial behaviors. Thus, researchers examine the effect that information from formal advisors has on the financial behaviors of low-income employees. In this study, formal advisors include financial plan- ners, bankers, brokers, employers, accountants, insurance agents, and lawyers. Using data from the 2010 Survey of Consumer Finances, researchers find a significant and positive relationship between the use of information from formal advisors and low-income employees’ positive financial behaviors. In other words, low-income employees who use information from formal advisors exhibit better financial behaviors than those who do not.
{"title":"Low-income employees","authors":"Crystal R. Hudson, Lance Palmer","doi":"10.61190/fsr.v23i1.3184","DOIUrl":"https://doi.org/10.61190/fsr.v23i1.3184","url":null,"abstract":"\u0000 \u0000 \u0000This study investigates the financial literacy of low-income employees, by examining their financial behaviors. Thus, researchers examine the effect that information from formal advisors has on the financial behaviors of low-income employees. In this study, formal advisors include financial plan- ners, bankers, brokers, employers, accountants, insurance agents, and lawyers. Using data from the 2010 Survey of Consumer Finances, researchers find a significant and positive relationship between the use of information from formal advisors and low-income employees’ positive financial behaviors. In other words, low-income employees who use information from formal advisors exhibit better financial behaviors than those who do not. \u0000 \u0000 \u0000","PeriodicalId":100530,"journal":{"name":"Financial Services Review","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2014-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89780672","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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