Time is money: life cycle rational inertia and delegation of investment management : [Version November 2013]

We investigate the theoretical impact of including two empirically-grounded insights in a dynamic life cycle portfolio choice model. The first is to recognize that, when managing their own financial wealth, investors incur opportunity costs in terms of current and future human capital accumulation, particularly if human capital is acquired via learning by doing. The second is that we incorporate age-varying efficiency patterns in financial decisionmaking. Both enhancements produce inactivity in portfolio adjustment patterns consistent with empirical evidence. We also analyze individuals’ optimal choice between self-managing their wealth versus delegating the task to a financial advisor. Delegation proves most valuable to the young and the old. Our calibrated model quantifies welfare gains from including investment time and money costs, as well as delegation, in a life cycle setting

Contagious Runs in Money Market Funds and the Impact of a Government Guarantee

Despite a vast theoretical literature on contagious behavior of investors, little is known about its empirical evidence in a real financial crisis setting. This paper examines evidence for contagious runs in money market funds during the 2008 financial crisis, drawing on a rich data set tracking U.S. money market funds’ daily flows and their enrollment statuses in the Treasury Department’s Temporary Guarantee Program (TGP). Evaluating the positive externality effect from a peer fund’s enrollment in the TGP on non-enrolled funds, we show that panic-driven runs were contagious across funds. We find that funds’ stability due to their enrollment in the guarantee program spilled over and enhanced daily flows to a non-enrolled fund by $1.8 million compared to already-enrolled funds. Moreover, we find that retail investors were less likely than institutional investors to return to prime money market funds even after enrollment in the guarantee program, implying that the latter benefited more from the government back-stop. Results are germane to policies seeking to rebuild investor confidence in times of financial crises and reduce the chance of future contagion in this industry

Costly Portfolio Adjustment and the Delegation of Money Management

This paper investigates the theoretical impact of including two empirically-grounded innovations in a lifecycle portfolio choice model. The first innovation is a portfolio adjustment cost which employees face when managing their financial wealth rather than delegating the task to a professional money manager. When job-specific human capital is accumulated through learningby-doing, investing time in financial management imposes opportunity costs in terms of current and future human capital accumulation. The second innovation is the incorporation of agedependent efficiency patterns in financial decision making. These two innovations replicate observed inactivity in portfolio adjustment patterns, especially for younger and older employees. This framework also allows an analysis of the choice between managing one\u27s own money and delegating the task to a financial advisor. The calibrated model quantifies welfare gains that the delegation option can bring to the lifecycle setting

The Impact of Shrouded Fees: Evidence from a Natural Experiment

We study a natural experiment in the Indian mutual funds sector that created a 22 month period in which closed-end funds were allowed to charge an arguably shrouded amortized fee whereas open-end funds were forced to charge standard entry loads. We find that allowing closed-end funds to charge the shrouded type of fee led to a proliferation of closed-end funds in the market; 45 new closed-end funds were started over this 22 month period collecting 9.1 billion $U.S, whereas only two closed-ended funds were started in the 66 months prior to this period collecting .42 billion$U.S., and no closed-ended funds were started in the 20 months after this period. We argue that other theoretical determinants of the closed versus open ended organizational form did not change discretely around the natural experiment and thus are unlikely to explain the sudden emergence and disappearance of closed-end funds. We find closed-end funds did not perform better in terms of raw or risk-adjusted returns. If all the investors in closed-end funds during this period had invested in the lower fee open fund variety instead they would have paid 4.25 percent less in fees over this 22 month period, equal to approximately 500 million dollars in extra fees

On-Chip Cavity Optomechanical Coupling

On-chip cavity optomechanics, in which strong co-localization of light and mechanical motion is engineered, relies on efficient coupling of light both into and out of the on-chip optical resonator. Here we detail our particular style of tapered and dimpled optical fibers, pioneered by the Painter group at Caltech, which are a versatile and reliable solution to efficient on-chip coupling. First, a brief overview of tapered, single mode fibers is presented, in which the single mode cutoff diameter is highlighted. The apparatus used to create a dimpled tapered fiber is then described, followed by a comprehensive account of the procedure by which a dimpled tapered fiber is produced and mounted in our system. The custom-built optical access vacuum chambers in which our on-chip optomechanical measurements are performed are then discussed. Finally, the process by which our optomechanical devices are fabricated and the method by which we explore their optical and mechanical properties is explained. It is our expectation that this manuscript will enable the novice to develop advanced optomechanical experiments.Comment: 31 pages, 9 figure

A new approximation method for time-dependent problems in quantum mechanics

We propose an approximate solution of the time-dependent Schr\"odinger equation using the method of stationary states combined with a variational matrix method for finding the energies and eigenstates. We illustrate the effectiveness of the method by applying it to the time development of the wave-function in the quantum-mechanical version of the inflationary slow-roll transition.Comment: 9 pages, 3 figures, accepted on Physics Letters

Propositional Idea Density in written descriptions of health: Potential clinical applications

In order to assess the effect of word finding difficulties for the spontaneous discourse of people with aphasia, a number of different measures of informativeness have been developed for clinical application (Doyle, Goda, & Spencer, 1995; Nicholas & Brookshire, 1993; Oelschlaeger & Thorne, 1999; Wright, Silverman, & Newhoff, 2003). The main challenges for the assessment of discourse (written or spoken) relate to issues of validity and reliability (AUTHOR DELETED). There is a need for valid and authentic sampling which is personally relevant to individuals and additionally, able to be repeated for the same individual on successive occasions, and comparable to other individuals. The use of a consistent elicitation task that could be widely used for adult populations would be beneficial to both allow comparisons of the same individual over time and also across individuals

Cognitive Ability, Financial Literacy, and the Demand for Financial Advice at Older Ages: Findings from the Health and Retirement Study

This paper evaluates how cognitive ability and financial literacy shape the demand for financial advice at older ages. We analyze a new module of the Health and Retirement Study which queried older respondents about their usage of financial advice and other financial management activities. Results show that cognitive ability and financial literacy are often positively correlated with advice-seeking for financial matters. Generally speaking, the more cognitively able tend to seek financial advice from professionals outside of family members; nevertheless, they are also more likely to be overconfident regarding their investments. The more financially literate also tend to ask for help with money management, but they are less likely to be overconfident. Overall, our findings are suggestive that cognitive ability as well as financial literacy can help shape older persons’ money management behaviors

Geochemical constraints on the role of tuffisite veins in degassing at the 2008–09 Chaitén and 2011–12 Cordón Caulle rhyolite eruptions

Hybrid activity during the rhyolitic eruptions of Chaitén (2008-09) and Cordón Caulle (2011-2012) in Chile has offered unprecedented insights into the enigmatic and complex degassing processes occurring during eruptions of silicic magma. Highly permeable, transient fracture networks within the conduit can act as outgassing channels. Their interaction with deeper volatile-rich melt can account for both punctuated explosive activity and large-scale degassing of the system, leading towards predominantly effusive behaviour. In this study we characterise trace element concentrations and 210Pb-226Ra systematics within pyroclastic material from the recent eruptions at Chaitén and Cordón Caulle volcanoes. Results reveal how gas fluxing from deep, volatile-rich reservoirs to the surface, within magmatic conduits, can be recorded by trace elements and 210Pb-226Ra disequilibria in tuffisite veins. Tuffisite veins (particle-filled fracture networks) are present in volcanic bombs from both eruptions. Trace element heterogeneity associated with tuffisites preserves evidence for degassing. At Chaitén, enrichments (e.g. Cu) and depletions (e.g. Mo, Li and Bi) are identified in vein material and clasts transported within veins, and record multiple degassing events. At Cordón Caulle, enrichments of volatiles in an early vein (e.g. Tl and Bi) and depletions in a later vein (e.g. Cd, In, Pb and Tl) reflect interactions between glassy clasts and the carrier gas phase that transported them. In contrast, 210Pb and 226Ra, which can be fractionated during degassing, are mostly in secular equilibrium. Modelling suggests that the disparity between the signals preserved in these two types of chemical signatures reflects the brevity of degassing events and the relative volumes of tuffisite veins and the bodies of degassing magma that they source gas from. The lack of preserved 210Pb enrichments in tuffisite veins at both volcanoes places an upper limit on the mass of deeper, bubble-rich magma outgassed via tuffisites during their lifetime. This study shows that both the presence, and absence, of sample-scale geochemical heterogeneity can be used to place constraints on syn-eruptive physical processes and underlines the value of analysing a wide suite of trace element species