Mutual Fund Style, Characteristic-Matched Performance Benchmarks and Activity Measures: A New Approach

We propose a new approach for measuring mutual fund style and constructing characteristic-matched performance benchmarks that requires only portfolio holdings and two reference portfolios in each style dimension. The characteristic-matched performance benchmark literature typically follows a bottom-up approach by first matching individual stocks with benchmarks and then obtaining a portfolio’s excess return as a weighted average of the excess returns on each of its constituent stocks. Our approach is fundamentally different in that it matches portfolios and benchmarks directly. We illustrate our approach using portfolio holdings of 1183 fund managers over the period 2002-2009. We characterize the cross-section of fund manager styles and show how average style changes over time. The tracking error volatilities of our characteristic-matched benchmarks compare favorably with those of existing methods. Using our benchmarks we explore the link between activity and performance.Performance Measurement; Tailored Benchmark; Characteristic Matching; Size Profile; Growth Profile; Activity; Excess Return.

Portfolio Optimization: A Modeling Perspective

Investing is critical in the business world and is an avenue to make profit for many. Making the decisions of what to invest in involves intricate mathematics in order to reduce risk. We investigate portfolio optimization, which is a branch of economic and financial modeling that typically has the goal of maximizing an investment\u27s expected return. We explore a linear programming approach to a decision model for a first time investor. Our results are compared to our expectation and different outcomes are computed based on adjusting our models used for calculating rates of return and failure rates in order to best capture reality. We then explore how changing our constraint of confidence in our investment affects the distribution of the model

Social Security Disability Insurance, Medicare And Work: A Review of the SSDI and Medicare Rules Related to Work Activity. Guidelines for Proactively Using the SSDI and Medicare Work Incentives to Help Individuals with Disabilities Maximize Independence Through Work

This policy-to-practice brief will focus on issues related to benefits and work for the SSDI beneficiary. After first explaining what SSDI is and the differences between SSDI and SSI, we will explain two historical work disincentives: the substantial gainful activity (SGA) rule and the continuing disability review (CDR). We will then explore a number of work incentives or special rules that seek to encourage work by either allowing benefits to continue for limited periods while working (trial work period (TWP), extended period of eligibility (EPE)), or allow individuals to quickly return to benefits status when a work effort stops or wage levels dip below the SGA level (expedited reinstatement). We will also explain special rules for either ignoring some short-term employment efforts (unsuccessful work attempts) or reducing countable monthly wages to be measured against the SGA amount for the year in question (impairment related work expenses, subsidies, paid time off)

A Simulation Approach to Dynamic Portfolio Choice with an Application to Learning About Return Predictability

We present a simulation-based method for solving discrete-time portfolio choice problems involving non-standard preferences, a large number of assets with arbitrary return distribution, and, most importantly, a large number of state variables with potentially path-dependent or non-stationary dynamics. The method is flexible enough to accommodate intermediate consumption, portfolio constraints, parameter and model uncertainty, and learning. We first establish the properties of the method for the portfolio choice between a stock index and cash when the stock returns are either iid or predictable by the dividend yield. We then explore the problem of an investor who takes into account the predictability of returns but is uncertain about the parameters of the data generating process. The investor chooses the portfolio anticipating that future data realizations will contain useful information to learn about the true parameter values.

A Cloud-Based Retail Management System

Retail management systems have been deployed extensively as web applications and stand-alone systems. However, in order to maximize return on investment while also improving on retail business efficiency and performance, it is imperative to explore newer technologies that can be leveraged. Cloud computing shows great potential in this regard; and so it is our aim in this paper to develop a cloud-based retail management system. We realize this by first designing the framework of the system and then implementing it

Spousal Risk Preferences and Household Investment Decisions

Most adults are married, plan for retirement with their spouse, and pool assets to a significant degree. How then are each individual’s risk preferences combined in choosing the portfolio that represents for them the optimal tradeoff between risk and return? There are two pathways through which marriage could amplify the expression of individual risk preferences at the household level. First, if people choose spouses in part based on their appetite for risk, or another characteristic correlated with risk tolerance, then there could be polarization of household level risk preferences towards extremes. Second, spouses may strategically adjust their decisions to compensate for their spouse’s preferences. Is an only mildly risk averse person that is married to someone that is nearly risk neutral motivated to choose a very low risk low return asset allocation to compensate for their spouse’s risky behavior? In this paper we explore the influence of marriage on the expression of individual risk preferences by examining both sorting in the marriage market and strategic decision making. Using data from the Health and Retirement Survey we find a positive correlation between the risk preferences of spouses. We also develop a theoretical model that determines optimal investment allocations conditional on own and spousal risk tolerance. Optimal asset allocations from this model are compared to a naïve model that only includes own risk tolerance. In related research the explanatory power of the naïve and spousal models are evaluated for prediction ability based on actual asset allocation decisions for couples using the HRS data.Households, Risk, Investing, Consumer/Household Economics,

Portfolio Diversification in Europe

Have the euro and accompanying measures of financial integration had a discernable impact on the degree of diversification of European investors? This is an empirical question that this paper tries to answer by exploring four alternative avenues. First we focus on the final outcome: If European investors are indeed better diversified, their consumption should be increasingly correlated. Second we check more directly what is known about the composition of Europeans’ portfolios. A third perspective focuses on the evolution of returns and prices. If indeed European investors are attempting to exploit new arbitrage opportunities opened up by the euro and European financial integration, then it is likely that these behavioral changes will be matched by significant changes in returns or in the nature of the return generating process. Finally, we explore the possibility that the answer to our question may be better revealed by examining the changes that have taken place in the investment process itself.Risk sharing, Portfolio holdings, financial market integration, cross sectional dispersion