Bala G. Arshanapalli, Matthew Lutey, William A. Nelson, M. Pollak
In Who Is Better at Investment Decisions: Man or Machine?, from the Winter 2020 issue of The Journal of Wealth Management, J. P. Harrison and S. Samaddar (both of Georgia State University) examine whether robo-advisers construct better-performing portfolios than human advisers. Using a simulated contest between a top-rated robo-adviser and prominent human advisers, Harrison and Samaddar observed that the human advisers produced higher returns (even after fees) and advice that was tailored to the ages and investment amounts of hypothetical clients. By contrast, while the robo-adviser tailored advice based on the hypothetical investors’ self-declared risk tolerances, it was insensitive to age and investment amount. The findings challenge the conventional wisdom that robo-advisers can serve customers better and at lower cost than their human counterparts. TOPICS: Developed markets, financial crises and financial market history, portfolio theory, technical analysis
《谁更擅长投资决策:人还是机器?》乔治亚州立大学的j·p·哈里森(J. P. Harrison)和S.萨马达尔(S. Samaddar)在《财富管理杂志》(the Journal of Wealth Management) 2020年冬季号上研究了机器人顾问是否比人类顾问构建了更好的投资组合。哈里森和萨马达尔通过模拟顶级机器人顾问和著名人类顾问之间的竞争，观察到人类顾问产生了更高的回报(即使扣除费用)，并根据假想客户的年龄和投资金额量身定制了建议。相比之下，虽然机器人顾问根据假设投资者自我宣称的风险承受能力量身定制建议，但它对年龄和投资金额不敏感。这一发现挑战了传统观点，即机器人顾问可以比人类顾问更好、成本更低地为客户服务。主题:发达市场，金融危机和金融市场历史，投资组合理论，技术分析
{"title":"Practical Applications of The Profitability of Technical Analysis during Financial Bubbles","authors":"Bala G. Arshanapalli, Matthew Lutey, William A. Nelson, M. Pollak","doi":"10.3905/PA.8.2.429","DOIUrl":"https://doi.org/10.3905/PA.8.2.429","url":null,"abstract":"In Who Is Better at Investment Decisions: Man or Machine?, from the Winter 2020 issue of The Journal of Wealth Management, J. P. Harrison and S. Samaddar (both of Georgia State University) examine whether robo-advisers construct better-performing portfolios than human advisers. Using a simulated contest between a top-rated robo-adviser and prominent human advisers, Harrison and Samaddar observed that the human advisers produced higher returns (even after fees) and advice that was tailored to the ages and investment amounts of hypothetical clients. By contrast, while the robo-adviser tailored advice based on the hypothetical investors’ self-declared risk tolerances, it was insensitive to age and investment amount. The findings challenge the conventional wisdom that robo-advisers can serve customers better and at lower cost than their human counterparts. TOPICS: Developed markets, financial crises and financial market history, portfolio theory, technical analysis","PeriodicalId":179835,"journal":{"name":"Practical Application","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125016257","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}
In Is It Good to Sin When Times Are Bad? An Investigation of the Defensive Nature of Sin Stocks from the October 2020 issue of The Journal of Investing, author Greg Richey (of the University of California at Riverside) examines a variety of so-called sin industries, individually and altogether, to evaluate their resistance to downside risk as compared with the S&P 500 Index. Using an EGARCH model, Richey is able to show that negative market shocks, or “bad news events,” have a less negative impact on sin stock returns than do positive market shocks, or “good news events.” Using the VIX (also known as the fear index) for stock market volatility, he also indicates that VIX increases lead to delayed increases in anticipated volatilities for a mixed portfolio of various sin stocks. Overall, this makes sin stocks seem like a wise defensive choice for resisting negative shocks. TOPICS: Portfolio theory, portfolio construction, ESG investing
《时势不好时犯罪好吗?》《投资杂志》(the Journal of Investing) 2020年10月号上的一篇关于罪恶股票防御性质的调查，作者格雷格·里奇(加州大学河滨分校的Greg Richey)研究了各种所谓的罪恶行业，分别和总体，以评估它们与标准普尔500指数相比对下行风险的抵抗力。使用EGARCH模型，Richey能够证明负面市场冲击，或“坏消息事件”，对股票收益的负面影响小于正面市场冲击，或“好消息事件”。他用VIX(也被称为恐惧指数)来衡量股市波动，他还指出，VIX的增加会导致各种股票混合投资组合的预期波动延迟增加。总的来说，这使得股票看起来像是抵御负面冲击的明智防御选择。主题:投资组合理论、投资组合构建、ESG投资
{"title":"Practical Applications of Is It Good to Sin When Times Are Bad? An Investigation of the Defensive Nature of Sin Stocks","authors":"Greg M. Richey","doi":"10.3905/PA.9.1.431","DOIUrl":"https://doi.org/10.3905/PA.9.1.431","url":null,"abstract":"In Is It Good to Sin When Times Are Bad? An Investigation of the Defensive Nature of Sin Stocks from the October 2020 issue of The Journal of Investing, author Greg Richey (of the University of California at Riverside) examines a variety of so-called sin industries, individually and altogether, to evaluate their resistance to downside risk as compared with the S&P 500 Index. Using an EGARCH model, Richey is able to show that negative market shocks, or “bad news events,” have a less negative impact on sin stock returns than do positive market shocks, or “good news events.” Using the VIX (also known as the fear index) for stock market volatility, he also indicates that VIX increases lead to delayed increases in anticipated volatilities for a mixed portfolio of various sin stocks. Overall, this makes sin stocks seem like a wise defensive choice for resisting negative shocks. TOPICS: Portfolio theory, portfolio construction, ESG investing","PeriodicalId":179835,"journal":{"name":"Practical Application","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115174203","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}
In Glide Path Indexes, from the Spring 2020 edition of The Journal of Index Investing, Ronald Surz of GlidePath Wealth Management discusses how investors can protect their savings as they transition into retirement. Glide path indexes, such as target-date funds (TDFs), vary asset allocations depending on an investor’s age, reducing equity exposure as an individual approaches retirement. But most portfolios following industry-standard paths incorporate too much risk at the wrong time: the years bracketing retirement. If investors are allocated too heavily to equities during those years, they face the risk of liquidating stocks at low prices to produce cash flow for their the initial phase of their retirement. These unfortunate investors then have less to draw from to meet future retirement expenses and much less time to repair overall portfolio damage using income from employment or other sources. Surz proposes an alternative glide path that uses rigorous risk management and greater diversification to substantially diminish this hazard. To better protect savings, Surz’s approach dramatically lowers equity and long-term bond exposure in favor of safer assets as an investor nears her retirement date. His glide path strategy then gradually incorporates more equity and bond risk as investors move through retirement, so as to revitalize growth potential and extend the life of the investor’s savings. TOPICS: Wealth management, retirement, mutual fund performance
{"title":"Practical Applications of Glide Path Indexes","authors":"Ronald J. Surz","doi":"10.3905/PA.8.2.424","DOIUrl":"https://doi.org/10.3905/PA.8.2.424","url":null,"abstract":"In Glide Path Indexes, from the Spring 2020 edition of The Journal of Index Investing, Ronald Surz of GlidePath Wealth Management discusses how investors can protect their savings as they transition into retirement. Glide path indexes, such as target-date funds (TDFs), vary asset allocations depending on an investor’s age, reducing equity exposure as an individual approaches retirement. But most portfolios following industry-standard paths incorporate too much risk at the wrong time: the years bracketing retirement. If investors are allocated too heavily to equities during those years, they face the risk of liquidating stocks at low prices to produce cash flow for their the initial phase of their retirement. These unfortunate investors then have less to draw from to meet future retirement expenses and much less time to repair overall portfolio damage using income from employment or other sources. Surz proposes an alternative glide path that uses rigorous risk management and greater diversification to substantially diminish this hazard. To better protect savings, Surz’s approach dramatically lowers equity and long-term bond exposure in favor of safer assets as an investor nears her retirement date. His glide path strategy then gradually incorporates more equity and bond risk as investors move through retirement, so as to revitalize growth potential and extend the life of the investor’s savings. TOPICS: Wealth management, retirement, mutual fund performance","PeriodicalId":179835,"journal":{"name":"Practical Application","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124238478","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}
In Mutual Fund Returns and their Characteristics: A Simple Approach to Selecting Better-Performing Actively Managed Funds, from the April 2020 edition of The Journal of Investing, Burton G. Malkiel of Princeton University and Atanu Saha of Econ One Research discuss which mutual-fund attributes best predict future fund returns. The authors find that fund selection guided by a combination of characteristics—low turnover rates, low expense ratios, and high Sharpe ratios—can lead to portfolios that considerably outperform the average actively managed fund. The authors use a robust dataset comprising prices on US and international equity funds from 2000 to 2018. They investigate the persistence of fund attributes—fund age, size, net asset flows, prior-year returns, turnover rates, Sharpe ratios and expense ratios—in auguring future returns, both year-over-year and longer term. While verifying that expense ratios are significant predictors of a fund’s future returns, they stress that Sharpe ratios and turnover rates are even more predictive. Investors are encouraged to apply all three traits together to build better-performing fund portfolios. Moreover, these cost and risk-control characteristics persist enough to enable investors to dependably detect funds with extended, and statistically significant, above-average returns. TOPICS: Portfolio theory, portfolio construction, style investing
普林斯顿大学的Burton G. Malkiel和Econ One Research的Atanu Saha在《共同基金收益及其特征:选择表现较好的主动管理基金的简单方法》(2020年4月版)中讨论了哪些共同基金属性最能预测未来的基金回报。作者发现，在低周转率、低费用率和高夏普比率的组合特征指导下的基金选择，可以使投资组合的表现大大超过平均水平的主动管理基金。作者使用了一个强大的数据集，包括2000年至2018年美国和国际股票基金的价格。他们调查了基金属性的持续性——基金年龄、规模、净资产流量、上一年度回报率、周转率、夏普比率和费用比率——以预测未来的回报，包括同比回报和长期回报。在证实费用率是基金未来回报的重要预测指标的同时，他们强调夏普比率和换手率更具预测性。投资者被鼓励将这三种特征结合起来，以建立业绩更好的基金组合。此外，这些成本和风险控制特征持续存在，足以使投资者可靠地发现具有长期和统计上显著的高于平均回报的基金。主题:投资组合理论，投资组合构建，风格投资
{"title":"Practical Applications of Mutual Fund Returns and Their Characteristics: A Simple Approach to Selecting Better-Performing Actively Managed Funds","authors":"B. Malkiel, Atanu Saha","doi":"10.3905/PA.9.1.437","DOIUrl":"https://doi.org/10.3905/PA.9.1.437","url":null,"abstract":"In Mutual Fund Returns and their Characteristics: A Simple Approach to Selecting Better-Performing Actively Managed Funds, from the April 2020 edition of The Journal of Investing, Burton G. Malkiel of Princeton University and Atanu Saha of Econ One Research discuss which mutual-fund attributes best predict future fund returns. The authors find that fund selection guided by a combination of characteristics—low turnover rates, low expense ratios, and high Sharpe ratios—can lead to portfolios that considerably outperform the average actively managed fund. The authors use a robust dataset comprising prices on US and international equity funds from 2000 to 2018. They investigate the persistence of fund attributes—fund age, size, net asset flows, prior-year returns, turnover rates, Sharpe ratios and expense ratios—in auguring future returns, both year-over-year and longer term. While verifying that expense ratios are significant predictors of a fund’s future returns, they stress that Sharpe ratios and turnover rates are even more predictive. Investors are encouraged to apply all three traits together to build better-performing fund portfolios. Moreover, these cost and risk-control characteristics persist enough to enable investors to dependably detect funds with extended, and statistically significant, above-average returns. TOPICS: Portfolio theory, portfolio construction, style investing","PeriodicalId":179835,"journal":{"name":"Practical Application","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127242832","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}
Our understanding of what exactly ESG investing is, and how successful it is at achieving various desired outcomes, is complicated by several conceptual drawbacks. In ESG Investing: Conceptual Issues, from the Winter 2020 issue of The Journal Wealth Management, Bradford Cornell (Anderson Graduate School of Management) asserts that the very nature of what constitutes an ESG investment is unclear–and that there are no standard measures for evaluating how effective each one is at achieving its desired social outcome. Additionally, while billions of dollars are pouring into ESG investments, the popularity of “green” equities means lower returns, though in some cases upside can be mined by actively “greening” and selling off targeted investments. Practitioners who advocate abandoning the usual imperative to maximize shareholder value in favor of a more holistic stakeholder model are asking corporations to shoulder the burden of solving social problems. Public policy, Cornell says, should be left to democratically elected leaders, not corporate executives. TOPICS: ESG investing, portfolio construction, wealth management
{"title":"Practical Applications of ESG Investing: Conceptual Issues","authors":"Bradford Cornell","doi":"10.3905/PA.8.2.423","DOIUrl":"https://doi.org/10.3905/PA.8.2.423","url":null,"abstract":"Our understanding of what exactly ESG investing is, and how successful it is at achieving various desired outcomes, is complicated by several conceptual drawbacks. In ESG Investing: Conceptual Issues, from the Winter 2020 issue of The Journal Wealth Management, Bradford Cornell (Anderson Graduate School of Management) asserts that the very nature of what constitutes an ESG investment is unclear–and that there are no standard measures for evaluating how effective each one is at achieving its desired social outcome. Additionally, while billions of dollars are pouring into ESG investments, the popularity of “green” equities means lower returns, though in some cases upside can be mined by actively “greening” and selling off targeted investments. Practitioners who advocate abandoning the usual imperative to maximize shareholder value in favor of a more holistic stakeholder model are asking corporations to shoulder the burden of solving social problems. Public policy, Cornell says, should be left to democratically elected leaders, not corporate executives. TOPICS: ESG investing, portfolio construction, wealth management","PeriodicalId":179835,"journal":{"name":"Practical Application","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125442321","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}
Svend E. Hougaarn, Lassila Jukka, Niku Mätänen, Tarmo Valkoneame, Ed Westerh
In The Top Three Pension Systems: Denmark, Finland, and the Netherlandsfrom the Fall 2020 issue of TheJournal of Retirement, authors Svend E. Hougaard Jensen(of Copenhagen Business School), Jukka Lassila, Niku Määttänen, Tarmo Valkonen(all of the Research Institute of the Finnish Economy), and Ed Westerhout(of Tilburg University) analyze the three top-rated pension systems from the 2018 Mercer Global Pension Index. All three systems share common strengths: mandatory participation, a minimum guaranteed old-age income, a high income-replacement rate, and robust fiscal sustainability. They also have privatized elements (like decentralized management and market-based investing) and rely on social partners (employee and employer representatives) to help get public buy-in for policies. However, all three pension systems face similar challenges–like legitimacy issues (since social partners are elected by a shrinking number of union members) and the fact that mandatory pension contributions can preempt savings for shorter-term goals. Policymakers worldw study these pension systems to help find solutions to problems in their own systems. Policymakers in the United States can find valuable information on issues like privatizing Social Security, eligibility changes, and getting public buy-in for reforms designed to increase the system’s sustainability. TOPICS: Retirement, social security, pension funds, wealth management
在《退休杂志》2020年秋季版的前三大养老金体系:丹麦、芬兰和荷兰，作者send E. Hougaard Jensen(哥本哈根商学院)、Jukka Lassila、Niku Määttänen、Tarmo Valkonen(芬兰经济研究所的所有人)和Ed Westerhout(蒂尔堡大学)分析了2018年美世全球养老金指数中排名最高的三个养老金体系。这三个体系都有共同的优势:强制性参与、最低保障性养老收入、高收入替代率和强劲的财政可持续性。他们也有私有化的因素(如分散管理和基于市场的投资)，并依靠社会伙伴(雇员和雇主代表)来帮助公众购买政策。然而，这三种养老金制度都面临着类似的挑战——比如合法性问题(因为社会伙伴是由数量不断减少的工会成员选举产生的)，以及强制性养老金缴款可能会抢占短期目标的储蓄。政策制定者可以研究这些养老金体系，以帮助找到解决本国体系问题的办法。美国的政策制定者可以在诸如社会保障私有化、资格变更以及让公众支持旨在提高体系可持续性的改革等问题上找到有价值的信息。主题:退休、社会保障、养老基金、财富管理
{"title":"Practical Applications of The Top Three Pension Systems: Denmark, Finland, and the Netherlands","authors":"Svend E. Hougaarn, Lassila Jukka, Niku Mätänen, Tarmo Valkoneame, Ed Westerh","doi":"10.3905/PA.8.2.426","DOIUrl":"https://doi.org/10.3905/PA.8.2.426","url":null,"abstract":"In The Top Three Pension Systems: Denmark, Finland, and the Netherlandsfrom the Fall 2020 issue of TheJournal of Retirement, authors Svend E. Hougaard Jensen(of Copenhagen Business School), Jukka Lassila, Niku Määttänen, Tarmo Valkonen(all of the Research Institute of the Finnish Economy), and Ed Westerhout(of Tilburg University) analyze the three top-rated pension systems from the 2018 Mercer Global Pension Index. All three systems share common strengths: mandatory participation, a minimum guaranteed old-age income, a high income-replacement rate, and robust fiscal sustainability. They also have privatized elements (like decentralized management and market-based investing) and rely on social partners (employee and employer representatives) to help get public buy-in for policies. However, all three pension systems face similar challenges–like legitimacy issues (since social partners are elected by a shrinking number of union members) and the fact that mandatory pension contributions can preempt savings for shorter-term goals. Policymakers worldw study these pension systems to help find solutions to problems in their own systems. Policymakers in the United States can find valuable information on issues like privatizing Social Security, eligibility changes, and getting public buy-in for reforms designed to increase the system’s sustainability. TOPICS: Retirement, social security, pension funds, wealth management","PeriodicalId":179835,"journal":{"name":"Practical Application","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124903754","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}
Jiayi Du, M. Jin, Petter N. Kolm, G. Ritter, Yixuan Wang, Bofei Zhang
If a computer model using machine learning and artificial intelligence like Google’s DeepMind can beat the world’s best human player of the ancient Chinese game of “Go,” can a similar approach help solve the challenge of hedging and replicating option portfolios? Deep Reinforcement Learning for Option Replication and Hedging, from the Fall 2020 issue of The Journal of Financial Data Science, takes a “deep” dive into reinforcement learning approaches for option portfolios. It explores ways of training a computer “agent” by a clever form of trial and error to learn to replicate and hedge an option portfolio directly from data. It’s a positive step forward in the use of modern mathematical approaches to portfolio hedging, and the authors are extending their research in deep reinforcement learning (DRL) to real-world problems in finance, including trading, portfolio management, and hedging. TOPICS: Big data/machine learning, options, risk management, simulations
如果一个使用机器学习和人工智能(比如谷歌的DeepMind)的计算机模型可以击败世界上最好的人类围棋选手，那么类似的方法能否帮助解决对冲和复制期权投资组合的挑战?《金融数据科学杂志》(the Journal of Financial Data Science) 2020年秋季刊的《期权复制和套期保值的深度强化学习》(Deep Reinforcement Learning for Option Replication and Hedging)“深入”探讨了期权投资组合的强化学习方法。它探索了训练计算机“代理”的方法，通过一种聪明的试错法来学习直接从数据中复制和对冲期权投资组合。这是在使用现代数学方法进行投资组合对冲方面迈出的积极一步，作者正在将他们在深度强化学习(DRL)方面的研究扩展到金融中的现实问题，包括交易、投资组合管理和对冲。主题:大数据/机器学习，期权，风险管理，模拟
{"title":"Practical Applications of Deep Reinforcement Learning for Option Replication and Hedging","authors":"Jiayi Du, M. Jin, Petter N. Kolm, G. Ritter, Yixuan Wang, Bofei Zhang","doi":"10.3905/PA.9.1.436","DOIUrl":"https://doi.org/10.3905/PA.9.1.436","url":null,"abstract":"If a computer model using machine learning and artificial intelligence like Google’s DeepMind can beat the world’s best human player of the ancient Chinese game of “Go,” can a similar approach help solve the challenge of hedging and replicating option portfolios? Deep Reinforcement Learning for Option Replication and Hedging, from the Fall 2020 issue of The Journal of Financial Data Science, takes a “deep” dive into reinforcement learning approaches for option portfolios. It explores ways of training a computer “agent” by a clever form of trial and error to learn to replicate and hedge an option portfolio directly from data. It’s a positive step forward in the use of modern mathematical approaches to portfolio hedging, and the authors are extending their research in deep reinforcement learning (DRL) to real-world problems in finance, including trading, portfolio management, and hedging. TOPICS: Big data/machine learning, options, risk management, simulations","PeriodicalId":179835,"journal":{"name":"Practical Application","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134378452","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}
In Psychological Antecedents of Financial Risk Tolerance, from the Fall 2020 issue of The Journal of Wealth Management, authors Heena Thanki, Anushree Karani (both of Shri Jairambhi Patel Institute of Business Management and Computer Applications in Gujarat, India), and Anil Kumar Goyal (of Rukmini Devi Institute of Advanced Studies in New Delhi, India) analyze how psychological and behavioral factors influence financial risk tolerance (FRT) among investors. Past research has focused on how investors’ socioeconomic status, demographic characteristics, and personality types influence their FRT. But the authors say such studies may be of limited value since they do not consider financial satisfaction, financial anxiety, self-esteem, sensation-seeking behavior, and obsession with money. The authors surveyed nearly 400 investors to assess the correlations between these factors and FRT. They found that people who are more satisfied with their financial situation tend to have lower FRT. People who have higher self-esteem or engage in sensation-seeking behavior, and those with Type A personalities, tend to have higher FRT. Obsession with money shows only a weak correlation with FRT. The authors conclude that policymakers and financial advisors should consider such psychological and behavioral factors when deciding what risk level is suitable for investors. TOPIC: Wealth management
{"title":"Practical Applications of Psychological Antecedents of Financial Risk Tolerance","authors":"H. Thanki, Anushree Karani, Anil Goyal","doi":"10.3905/PA.8.2.420","DOIUrl":"https://doi.org/10.3905/PA.8.2.420","url":null,"abstract":"In Psychological Antecedents of Financial Risk Tolerance, from the Fall 2020 issue of The Journal of Wealth Management, authors Heena Thanki, Anushree Karani (both of Shri Jairambhi Patel Institute of Business Management and Computer Applications in Gujarat, India), and Anil Kumar Goyal (of Rukmini Devi Institute of Advanced Studies in New Delhi, India) analyze how psychological and behavioral factors influence financial risk tolerance (FRT) among investors. Past research has focused on how investors’ socioeconomic status, demographic characteristics, and personality types influence their FRT. But the authors say such studies may be of limited value since they do not consider financial satisfaction, financial anxiety, self-esteem, sensation-seeking behavior, and obsession with money. The authors surveyed nearly 400 investors to assess the correlations between these factors and FRT. They found that people who are more satisfied with their financial situation tend to have lower FRT. People who have higher self-esteem or engage in sensation-seeking behavior, and those with Type A personalities, tend to have higher FRT. Obsession with money shows only a weak correlation with FRT. The authors conclude that policymakers and financial advisors should consider such psychological and behavioral factors when deciding what risk level is suitable for investors. TOPIC: Wealth management","PeriodicalId":179835,"journal":{"name":"Practical Application","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126848094","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}
In An Inconvenient Fact: Private Equity Returns and the Billionaire Factory, from the December 2020 issue of The Journal of Investing, author Ludovic Phalippou (of the Saïd Business School at the University of Oxford) challenges the perception that private equity (PE) provides institutional investors with higher returns that justify its higher fees. PE is not available to the general public—and since PE investments are not continuously traded, there are no publicly available measures of PE rates of return. Therefore, PE firms use internal rate of return (IRR) as their primary advertised performance measure. However, a more appropriate measure of PE performance is based on a net present value (NPV) calculation, such as the public market equivalent (PME). Using this performance measure, Phalippou shows that US PE has produced about the same net-of-fees returns as the most common US stock indexes since 2006. Meanwhile, a small number of PE managers have become billionaires by receiving incentive fees based on absolute performance, not performance relative to any benchmark. The author questions who really benefits from PE investing, explains why pension funds and universities continue to embrace it, and offers suggestions to make PE investing more sustainable. TOPICS: Private equity, statistical methods, performance measurement
{"title":"An Inconvenient Fact: Private Equity Returns and the Billionaire Factory","authors":"Ludovic Phalippou","doi":"10.3905/PA.8.2.430","DOIUrl":"https://doi.org/10.3905/PA.8.2.430","url":null,"abstract":"In An Inconvenient Fact: Private Equity Returns and the Billionaire Factory, from the December 2020 issue of The Journal of Investing, author Ludovic Phalippou (of the Saïd Business School at the University of Oxford) challenges the perception that private equity (PE) provides institutional investors with higher returns that justify its higher fees. PE is not available to the general public—and since PE investments are not continuously traded, there are no publicly available measures of PE rates of return. Therefore, PE firms use internal rate of return (IRR) as their primary advertised performance measure. However, a more appropriate measure of PE performance is based on a net present value (NPV) calculation, such as the public market equivalent (PME). Using this performance measure, Phalippou shows that US PE has produced about the same net-of-fees returns as the most common US stock indexes since 2006. Meanwhile, a small number of PE managers have become billionaires by receiving incentive fees based on absolute performance, not performance relative to any benchmark. The author questions who really benefits from PE investing, explains why pension funds and universities continue to embrace it, and offers suggestions to make PE investing more sustainable. TOPICS: Private equity, statistical methods, performance measurement","PeriodicalId":179835,"journal":{"name":"Practical Application","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133265259","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}
Mark M. Higgins, Matthew Sturdivan, Janelle Booth, Claire Illo
In Using Active Share to Evaluate Single- and Multi-Manager Portfolios, in the April 2020 Fund Manager Selection special edition of The Journal of Portfolio Management, Mark Higgins, Matthew Sturdivan, Janelle Booth, and Claire Illo, all of RVK, Inc., consider the use of active share to evaluate investment strategies and to select and monitor individual equity managers. Active share statistically measures the difference between a fund manager’s portfolio holdings and the weightings of the fund’s benchmark index. The authors analyze how investors can apply active share when assessing their strategies and managers’ performance and thereby improve their manager selection and portfolio building. Using a simulation approach to evaluate multi-manager US large-cap equity portfolios, the authors show how active share can help quantify the impact of managerial diversification on the quality and efficiency of multi-manager portfolios. They also demonstrate how investors can establish a conditional ideal number of managers for a portfolio. They note, however, that active share has several limitations and should be coupled with other quantitative and qualitative analytical measures to build multi-manager portfolios. TOPICS: Manager selection, performance measurement
在《投资组合管理杂志》2020年4月的基金经理选择特别版中，RVK, Inc.的Mark Higgins, Matthew Sturdivan, Janelle Booth和Claire Illo考虑使用主动股份来评估投资策略并选择和监控个人股票经理。活跃份额在统计上衡量基金经理的投资组合持有量与基金基准指数权重之间的差异。作者分析了投资者如何在评估其策略和经理绩效时应用积极份额，从而改善他们的经理选择和投资组合建设。使用模拟方法来评估多经理美国大盘股投资组合，作者展示了积极股票如何帮助量化管理多元化对多经理投资组合质量和效率的影响。他们还展示了投资者如何为投资组合建立一个有条件的理想经理人数量。但是，他们指出，积极的份额有若干限制，应与其他数量和质量分析措施结合起来，以建立多管理人的投资组合。主题:经理选择，绩效评估
{"title":"Practical Applications of Using Active Share to Evaluate Single- and Multi-Manager Portfolios","authors":"Mark M. Higgins, Matthew Sturdivan, Janelle Booth, Claire Illo","doi":"10.3905/PA.8.2.428","DOIUrl":"https://doi.org/10.3905/PA.8.2.428","url":null,"abstract":"In Using Active Share to Evaluate Single- and Multi-Manager Portfolios, in the April 2020 Fund Manager Selection special edition of The Journal of Portfolio Management, Mark Higgins, Matthew Sturdivan, Janelle Booth, and Claire Illo, all of RVK, Inc., consider the use of active share to evaluate investment strategies and to select and monitor individual equity managers. Active share statistically measures the difference between a fund manager’s portfolio holdings and the weightings of the fund’s benchmark index. The authors analyze how investors can apply active share when assessing their strategies and managers’ performance and thereby improve their manager selection and portfolio building. Using a simulation approach to evaluate multi-manager US large-cap equity portfolios, the authors show how active share can help quantify the impact of managerial diversification on the quality and efficiency of multi-manager portfolios. They also demonstrate how investors can establish a conditional ideal number of managers for a portfolio. They note, however, that active share has several limitations and should be coupled with other quantitative and qualitative analytical measures to build multi-manager portfolios. TOPICS: Manager selection, performance measurement","PeriodicalId":179835,"journal":{"name":"Practical Application","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132410883","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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