Chapter 28 Investment Policy and the Framework of the CFA Institute
... live to age 81. The plan allows for two types of investments. One offers a 3.5% risk-free real rate of return. The other offers an expected return of 10% and has a standard deviation of 23%. Stephanie now has 5% of her money in the risk-free investment and 95% in the risky investment. She plans to c ...
... live to age 81. The plan allows for two types of investments. One offers a 3.5% risk-free real rate of return. The other offers an expected return of 10% and has a standard deviation of 23%. Stephanie now has 5% of her money in the risk-free investment and 95% in the risky investment. She plans to c ...
Risk analysis of the proxy life-cycle investments in the second pillar
... For the purpose of optimizing the cost of the system on the one hand and efforts to approximate the true life-cycle investment model with the proxy model, as far as possible, in practice there are only three to five pension funds of various risk categories. Depending on the number of funds, for a me ...
... For the purpose of optimizing the cost of the system on the one hand and efforts to approximate the true life-cycle investment model with the proxy model, as far as possible, in practice there are only three to five pension funds of various risk categories. Depending on the number of funds, for a me ...
Time-varying expected momentum profits
... periods of down markets. However, these authors interpret these results as consistent with the overreaction models of Daniel et al. (1998) and Hong and Stein (1999).1 In our view, a possible reason behind the discrepancy in the above authors’ different interpretations is that the above two studies d ...
... periods of down markets. However, these authors interpret these results as consistent with the overreaction models of Daniel et al. (1998) and Hong and Stein (1999).1 In our view, a possible reason behind the discrepancy in the above authors’ different interpretations is that the above two studies d ...
Mutual Fund Ratings: What is the Risk in Risk
... lengthens. This is seen in Figure 4, which shows the faster decline of the index' probabilities of underperforming T-Bills as the holding period lengthens from 1 to 10 years. So those who are mainly interested in outperforming a cumulative investment in one-month TBills should rank the index above t ...
... lengthens. This is seen in Figure 4, which shows the faster decline of the index' probabilities of underperforming T-Bills as the holding period lengthens from 1 to 10 years. So those who are mainly interested in outperforming a cumulative investment in one-month TBills should rank the index above t ...
Managing biodiversity correctly – Efficient portfolio - Bio
... “Of every clean beast thou shalt take to thee by sevens, the male and his female; and of beasts that are not clean by two, the male and his female, to keep seed alive upon the face of all the earth.”(Genesis 7, 2-3) Similar accounts can be found in other religious texts, for instance in the Koran (c ...
... “Of every clean beast thou shalt take to thee by sevens, the male and his female; and of beasts that are not clean by two, the male and his female, to keep seed alive upon the face of all the earth.”(Genesis 7, 2-3) Similar accounts can be found in other religious texts, for instance in the Koran (c ...
The anatomy of the bond market turbulence of 1994
... the data. At the outset, recall that financial markets have confronted this problem in the past. The most famous example is the London Interbank Offered Rate (LIBOR) for bank deposits, which, just as an OTC option contract, can expose the buyer to the selling bank's credit risk. Big syndicated loan ...
... the data. At the outset, recall that financial markets have confronted this problem in the past. The most famous example is the London Interbank Offered Rate (LIBOR) for bank deposits, which, just as an OTC option contract, can expose the buyer to the selling bank's credit risk. Big syndicated loan ...
Do Market Efficiency Measures Yield Correct Inferences?
... measures, and impediments to efficient pricing, such as transaction costs. The article provides new insight into differences in stock, portfolio, and countrylevel efficiency measures around the world but also points to the limitations of standard notions and measures of stock market efficiency. Our ...
... measures, and impediments to efficient pricing, such as transaction costs. The article provides new insight into differences in stock, portfolio, and countrylevel efficiency measures around the world but also points to the limitations of standard notions and measures of stock market efficiency. Our ...
Buyout Activity: The Impact of Aggregate Discount Rates
... buyout activity, we also exploit the cross-section of firms to further distinguish the risk premium from alternative hypotheses. First, riskier firms have a higher cost of capital and greater illiquidity costs, making them undesirable buyout targets. In the panel, we confirm the propensity of a firm ...
... buyout activity, we also exploit the cross-section of firms to further distinguish the risk premium from alternative hypotheses. First, riskier firms have a higher cost of capital and greater illiquidity costs, making them undesirable buyout targets. In the panel, we confirm the propensity of a firm ...
Adverse Selection, Liquidity, and Market Breakdown
... The equilibrium price of the risky asset is equal to the lesser of two amounts: the discounted value of ...
... The equilibrium price of the risky asset is equal to the lesser of two amounts: the discounted value of ...
Effect of Investor Sentiment on Market Response to Stock Splits
... Second, sock fund flows can be a sentiment proxy. Franzzini and Lamont(2005) argue that fund flows of individual investors can be used as sentiment since they consider economic prospect when they reallocate their funds between different type of funds4. Thus, we can conjecture that when investors exp ...
... Second, sock fund flows can be a sentiment proxy. Franzzini and Lamont(2005) argue that fund flows of individual investors can be used as sentiment since they consider economic prospect when they reallocate their funds between different type of funds4. Thus, we can conjecture that when investors exp ...
A Lost Art Is active management doomed?
... Despite the potential difficulty in adding value from active management, government bonds remain popular with institutional investors because they provide a highly dependable stream of cash flows that can be used to match known liabilities. This match, combined with the apparently limited potential so ...
... Despite the potential difficulty in adding value from active management, government bonds remain popular with institutional investors because they provide a highly dependable stream of cash flows that can be used to match known liabilities. This match, combined with the apparently limited potential so ...
Sustainable Withdrawal Rates From Your Retirement Portfolio
... payout period with a terminal value that is greater than zero. Using historical financial market returns, the study suggests that portfolios of at least 75% stock provide 4% to 5% inflationadjusted withdrawals. Key Words: Retirement planning, Retirement wealth adequacy Specifying a sustainable withd ...
... payout period with a terminal value that is greater than zero. Using historical financial market returns, the study suggests that portfolios of at least 75% stock provide 4% to 5% inflationadjusted withdrawals. Key Words: Retirement planning, Retirement wealth adequacy Specifying a sustainable withd ...
An international trend in market design: Endogenous effects of limit
... Madhavan (1996 ) concludes that “In a sufficiently large market transparency reduces volatility and improves market quality”. However, if the market is relatively thin, Madhavan (1996 ) demonstrates that “market transparency can actually increase price volatility and lower market liquidity. This oc ...
... Madhavan (1996 ) concludes that “In a sufficiently large market transparency reduces volatility and improves market quality”. However, if the market is relatively thin, Madhavan (1996 ) demonstrates that “market transparency can actually increase price volatility and lower market liquidity. This oc ...
Learning, Rare Disasters, and Asset Prices
... σθ2 . Thus, θτ is a disaster-specific parameter which measures the severity of a particular disaster τ . Agents in the benchmark model observe current and past realizations of consumption ct ≡ {cs }ts=0 but do not observe current and past states {Is }ts=0 or disaster-specific parameters {θs }τs=0 . ...
... σθ2 . Thus, θτ is a disaster-specific parameter which measures the severity of a particular disaster τ . Agents in the benchmark model observe current and past realizations of consumption ct ≡ {cs }ts=0 but do not observe current and past states {Is }ts=0 or disaster-specific parameters {θs }τs=0 . ...
***** 1
... When a business combination agreement provides for an adjustment to the cost of the combination contingent on future events, the acquirer shall include the estimated amount of that adjustment in the cost of the combination at the acquisition date if the adjustment is probable and can be measured rel ...
... When a business combination agreement provides for an adjustment to the cost of the combination contingent on future events, the acquirer shall include the estimated amount of that adjustment in the cost of the combination at the acquisition date if the adjustment is probable and can be measured rel ...
expected returns
... are all very relevant topics for longer-term investors, but couldn’t we have picked less depressing subjects? Where is the upside in global warming? What is the ‘positive angle’ when it comes to the ever-increasing debt pile? Not that we want to shy away from bad news or weighty subjects, but isn’t ...
... are all very relevant topics for longer-term investors, but couldn’t we have picked less depressing subjects? Where is the upside in global warming? What is the ‘positive angle’ when it comes to the ever-increasing debt pile? Not that we want to shy away from bad news or weighty subjects, but isn’t ...
Do Mergers and Acquisitions Create Shareholder Wealth In The
... negative. For Jensen (1986), availability of free cash flow can lead to value-reducing mergers while Shleifer and Vishny (1989) state that managers may make investments that increase manager value to shareholders but that do not improve shareholders returns. The evidence also suggests that payment m ...
... negative. For Jensen (1986), availability of free cash flow can lead to value-reducing mergers while Shleifer and Vishny (1989) state that managers may make investments that increase manager value to shareholders but that do not improve shareholders returns. The evidence also suggests that payment m ...
NBER WORKING PAPER SERIES TEMPERATURE, AGGREGATE RISK, AND EXPECTED RETURNS Ravi Bansal
... Given the prospect of rising global temperature, understanding the potential impact of temperature on the macro-economy and financial markets is of considerable importance. In this article we show that temperature is a source of economic risk in global equity markets; we provide evidence that temper ...
... Given the prospect of rising global temperature, understanding the potential impact of temperature on the macro-economy and financial markets is of considerable importance. In this article we show that temperature is a source of economic risk in global equity markets; we provide evidence that temper ...
Screening techniques, sustainability and risk adjusted returns.
... Previous studies have primarily compared the performance of sustainable equity funds and non-sustainable equity funds. A meta-analysis over 85 different studies in the field concludes that there is no statistically significant difference in risk-adjusted returns when comparing sustainable funds and ...
... Previous studies have primarily compared the performance of sustainable equity funds and non-sustainable equity funds. A meta-analysis over 85 different studies in the field concludes that there is no statistically significant difference in risk-adjusted returns when comparing sustainable funds and ...
ESG version 5_A4:Layout 1.qxd
... that the majority of a fund’s returns are driven by market exposure or systematic risk. ESG Beta is about getting better risk-adjusted returns from that market exposure by removing inefficiencies and costs associated with poor management of ESG issues, thereby benefiting the collective investments o ...
... that the majority of a fund’s returns are driven by market exposure or systematic risk. ESG Beta is about getting better risk-adjusted returns from that market exposure by removing inefficiencies and costs associated with poor management of ESG issues, thereby benefiting the collective investments o ...
NBER WORKING PAPER SERIES PREDICTABLE RETURNS AND ASSET ALLOCATION:
... Confronted with this theory and evidence, the literature has focused on two polar viewpoints. On the one hand, if models such as Samuelson (1965) are correct, investors should maintain constant weights rather than form portfolios based on possibly spurious evidence of predictability. On the other ha ...
... Confronted with this theory and evidence, the literature has focused on two polar viewpoints. On the one hand, if models such as Samuelson (1965) are correct, investors should maintain constant weights rather than form portfolios based on possibly spurious evidence of predictability. On the other ha ...
An Analysis of Risk Assessment Questions Based on Loss
... variation in future consumption. Individuals who are more willing to accept variation in future consumption are more risk tolerant or less risk averse. Individuals with a low level of risk tolerance will prefer a less volatile consumption path over their life span compared to someone who has a great ...
... variation in future consumption. Individuals who are more willing to accept variation in future consumption are more risk tolerant or less risk averse. Individuals with a low level of risk tolerance will prefer a less volatile consumption path over their life span compared to someone who has a great ...
Temperature, Aggregate Risk, and Expected Returns
... Given the prospect of rising global temperature, understanding the potential impact of temperature on the macro-economy and financial markets is of considerable importance. In this article we show that temperature is a source of economic risk in global equity markets; we provide evidence that temper ...
... Given the prospect of rising global temperature, understanding the potential impact of temperature on the macro-economy and financial markets is of considerable importance. In this article we show that temperature is a source of economic risk in global equity markets; we provide evidence that temper ...
Investment Guide - REST Industry Super
... to invest in REST Super, REST Corporate, REST Select or Acumen. The information in this document is general information only and doesn’t take into account your individual objectives, financial situation or needs. Accordingly, before acting on the contents of the relevant PDS, you should consider whe ...
... to invest in REST Super, REST Corporate, REST Select or Acumen. The information in this document is general information only and doesn’t take into account your individual objectives, financial situation or needs. Accordingly, before acting on the contents of the relevant PDS, you should consider whe ...
Beta (finance)
In finance, the beta (β) of an investment is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors. The market portfolio of all investable assets has a beta of exactly 1. A beta below 1 can indicate either an investment with lower volatility than the market, or a volatile investment whose price movements are not highly correlated with the market. An example of the first is a treasury bill: the price does not go up or down a lot, so it has a low beta. An example of the second is gold. The price of gold does go up and down a lot, but not in the same direction or at the same time as the market.A beta greater than one generally means that the asset both is volatile and tends to move up and down with the market. An example is a stock in a big technology company. Negative betas are possible for investments that tend to go down when the market goes up, and vice versa. There are few fundamental investments with consistent and significant negative betas, but some derivatives like equity put options can have large negative betas.Beta is important because it measures the risk of an investment that cannot be reduced by diversification. It does not measure the risk of an investment held on a stand-alone basis, but the amount of risk the investment adds to an already-diversified portfolio. In the capital asset pricing model, beta risk is the only kind of risk for which investors should receive an expected return higher than the risk-free rate of interest.The definition above covers only theoretical beta. The term is used in many related ways in finance. For example, the betas commonly quoted in mutual fund analyses generally measure the risk of the fund arising from exposure to a benchmark for the fund, rather than from exposure to the entire market portfolio. Thus they measure the amount of risk the fund adds to a diversified portfolio of funds of the same type, rather than to a portfolio diversified among all fund types.Beta decay refers to the tendency for a company with a high beta coefficient (β > 1) to have its beta coefficient decline to the market beta. It is an example of regression toward the mean.