Journal of Wealth Management最新文献

{"title":"Supply and Demand Power of Gold Influencing Gold Pricing","authors":"Manu Sharma, Puneet Gupta, R. Gopal","doi":"10.3905/jwm.2019.1.088","DOIUrl":"https://doi.org/10.3905/jwm.2019.1.088","url":null,"abstract":"This research analysis establishes a relationship between historical gold prices and two independent variables: the supply and the demand for gold. It goes on to determine the robustness of this relationship, and to explain the extent and degree of variance in the relationship by computing the coefficient of correlation and the coefficient of determination using two different methods. The results show a correlation between gold prices and gold supply, but a lower correlation between gold prices and gold demand. TOPICS: Wealth management, other real assets Key Findings • How demand influences price of gold. • How supply influences price of gold. • Regression coefficients of supply and demand for pricing.","PeriodicalId":39998,"journal":{"name":"Journal of Wealth Management","volume":"22 1","pages":"129 - 133"},"PeriodicalIF":0.0,"publicationDate":"2019-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46677278","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}

{"title":"A Regime Change: Non-Linearity in Wealth and Investment Management","authors":"Matthias W. Uhl, P. Rohner","doi":"10.3905/jwm.2019.22.3.021","DOIUrl":"https://doi.org/10.3905/jwm.2019.22.3.021","url":null,"abstract":"The wealth and investment management industries are undergoing significant structural changes due to technological advancements, updated client needs, and regulatory challenges. The authors highlight the advantages to financial advisors of accepting non-linearity in business models, client requirements, and investment strategies vs. relying on established linear value chains, outdated client beliefs, and linearity in investment strategies. TOPICS: Wealth management, statistical methods, simulations, big data/machine learning Key Findings • The wealth and investment management industries are undergoing significant structural changes due to technological advancements, updated client needs, and regulatory challenges. • We highlight the advantages to financial advisors of accepting non-linearity in business models, client requirements, and investment strategies vs. relying on established linear value chains, outdated client beliefs, and linearity in investment strategies. • When clients and their needs become the system, we have arrived at the next stage of wealth and investment management.","PeriodicalId":39998,"journal":{"name":"Journal of Wealth Management","volume":"22 1","pages":"21 - 27"},"PeriodicalIF":0.0,"publicationDate":"2019-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47534846","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}

{"title":"Markowitz Portfolios with Graham Bands in the Accumulation Phase","authors":"P. Hagelstein, I. Lackner, J. Otto, A. Perona, R. Piziak","doi":"10.3905/jwm.2019.1.084","DOIUrl":"https://doi.org/10.3905/jwm.2019.1.084","url":null,"abstract":"In this article, the authors consider historical real returns of tax-exempt portfolios consisting of equities and short-term bonds over 90 different 30-year time periods from 1900 to 2018, in which fixed real contributions were made to the portfolios annually. Two main types of portfolios are considered. The first is a “Markowitz portfolio” in which the investor annually contributed evenly between equities and bonds and never rebalanced the portfolio. The second is a “Markowitz portfolio with Graham bands,” in which the investor annually contributed evenly between equities and bonds but rebalanced the portfolio to an overall 50/50 allocation whenever the equity or the bond portion of the portfolio exceeded 75% of the overall portfolio value. The authors also consider analogous results when short-term bonds were replaced by less-liquid guaranteed income instruments, such as TIAA Traditional, providing higher yields. These results are intended to provide useful historical data to assist investors in the accumulation phase and their advisors in asset allocation decisions. TOPICS: Portfolio theory, portfolio construction, equity portfolio management Key Findings • Historically, investors in a thirty-year accumulation phase have done well by contributing half of their investments in an index fund modeling the S&P 500 and the other half in short-term government securities; never rebalancing. In this article, such a portfolio is called a “Markowitz portfolio.” • Investors in a thirty-year accumulation phase have also historically done well by contributing half of their investments to an S&P index fund and the other half to short-term government securities; rebalancing the portfolio back to a 50/50 allocation whenever either the equity or the bond portion of the portfolio exceeded 75% of the overall value. Such an investment strategy is consistent with one advocated by Benjamin Graham. However, such rebalancing has had a historical tendency to provide portfolio returns lower than that of the Markowitz portfolio indicated above. • Since 1900, investors implementing either of the above two strategies, when contributing annually a constant real value to their portfolios, never had in the accumulation phase the bond portion exceed 75% of the overall portfolio value. Hence, investors sympathetic to either of the above allocations might wish to consider placing the bond portion of their portfolios into less-liquid instruments typically providing a higher yield. Historically, such investment modification has provided improved returns.","PeriodicalId":39998,"journal":{"name":"Journal of Wealth Management","volume":"111 15","pages":"41 - 48"},"PeriodicalIF":0.0,"publicationDate":"2019-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41264800","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}

{"title":"Concepts, Components, and Collections of Trading Strategies and Market Color","authors":"R. Kashyap","doi":"10.3905/jwm.2019.1.082","DOIUrl":"https://doi.org/10.3905/jwm.2019.1.082","url":null,"abstract":"This article offers a collection of various trading strategies and useful pieces of market information that might help to implement such strategies. The list is meant to be comprehensive (though by no means exhaustive) and hence the author only provides pointers and further sources to explore each strategy further. To set the stage for this exploration, he considers the factors that determine good and bad trades, the notions of market efficiency, the real prospect amid the seemingly high expectations of homogeneous expectations from human beings, and the catch-22 connotations that arise when comprehending the true meaning of rational investing. The author broadly classifies trading ideas and client market color material into delta-one and derivative strategies, since this acts as a natural categorization that depends on the expertise of the various trading desks that implement these strategies. For each strategy, he offers a core idea and presents different flavors of this central theme to demonstrate that we can easily cater to the varying risk appetites, regional preferences, asset management styles, investment philosophies, liability constraints, investment horizons, notional trading size, trading frequency, and other preferences of different market participants. TOPICS: Portfolio theory, portfolio construction, equity portfolio management Key Findings • Collection of trading strategies and market information that is helpful to implement such strategies. • Exploration of factors that determine good and bad trades and notions of market efficiency. • Catch-22 connotations that arise when considering the true meaning of rational investing.","PeriodicalId":39998,"journal":{"name":"Journal of Wealth Management","volume":"22 1","pages":"115 - 128"},"PeriodicalIF":0.0,"publicationDate":"2019-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46688504","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}

{"title":"Diversification Benefits, Where Art Thou?","authors":"S. Pittman, Amneet Singh, S. Srinivasan","doi":"10.3905/jwm.2019.1.081","DOIUrl":"https://doi.org/10.3905/jwm.2019.1.081","url":null,"abstract":"Following the global financial crisis, a portfolio concentrated in US large cap equity and aggregate fixed income has provided higher returns than diversified portfolios through 2019. Such a prolonged experience causes investors to question the benefits of diversification. This leads us to use a longer history of data across 15 asset classes to understand the historical benefits of diversifying a portfolio with international equity, real assets, and below-investment-grade fixed income. The authors’ results portray the frequency and magnitude of risk-adjusted return improvement coming from different diversifying asset classes over five-year holding periods. The authors find that certain asset classes, such as below-investment-grade fixed income, regularly improve risk-adjusted return of the portfolio, while other asset classes like commodities improve risk-adjusted returns less frequently. Further, they observe that some asset classes do not deliver meaningful risk-adjusted return improvements in the presence of other asset classes. Their conclusion is that investors should continue to build diversified portfolios, but in doing so they should consider that some asset classes more consistently improved risk-adjusted returns than others. TOPICS: Wealth management, retirement, fixed-income portfolio management Key Findings • Certain asset classes, such as below-investment-grade fixed income, have provided consistent diversification benefits through time, while other asset classes, such as commodities (despite its low correlation to other asset classes), have less frequently improved portfolio performance. • Some asset classes have not delivered meaningful portfolio diversification benefits in the presence of other asset classes during the periods we examined. • We observe cyclicality in the improvement of portfolio returns from holding a more diversified portfolio. The periodicity appears longer than the US business cycle. Moreover, the time series of relative price-to-earnings ratios of US and international equity appears to move countercyclically with the outperformance of diversified portfolios.","PeriodicalId":39998,"journal":{"name":"Journal of Wealth Management","volume":"22 1","pages":"70 - 84"},"PeriodicalIF":0.0,"publicationDate":"2019-09-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44283787","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}

{"title":"Using the Volatility Risk Premium to Mitigate the Next Financial Crisis","authors":"Weili Ge","doi":"10.3905/jwm.2019.1.078","DOIUrl":"https://doi.org/10.3905/jwm.2019.1.078","url":null,"abstract":"Ten years have passed since the trough of the Global Financial Crisis, and the US equity market has experienced one of the longest stretches of ascent in history. Some investors have started questioning whether the US stock market is overvalued and if a recession is on the way. It is usually impossible to predict the next financial crisis. An investor’s best course of action may be to adjust the investment portfolio to be resilient against potential market headwinds. This article argues for utilizing the volatility risk premium (VRP), specifically option-selling VRP strategies, to mitigate the losses the portfolio may suffer from a future financial crisis. Such a VRP strategy, if implemented with out-of-the-money equity index options, can help investors cushion the losses from an equity market crash and recover more quickly than the broad equity market. Investors can utilize the VRP by itself or combine it with traditional equity to construct the most suitable investment strategies. This article further examines implementation choices of such strategies and stress tests their performance with four representative crises from the past three decades. TOPICS: Analysis of individual factors/risk premia, wealth management, financial crises and financial market history Key Findings • The US equity market may be overvalued after the decade-old rally, and an investor’s best approach may be portfolio adjustment against potential market headwinds. • The volatility risk premium (VRP), specifically option-selling VRP strategies, can help investors mitigate losses the portfolio may suffer from a future financial crisis. • Two mechanisms help overlay VRP strategies: low delta options only initiate payouts after the index fall below strike prices; higher implied volatility (IV) translates into higher premium collection in crisis times.","PeriodicalId":39998,"journal":{"name":"Journal of Wealth Management","volume":"22 1","pages":"85 - 97"},"PeriodicalIF":0.0,"publicationDate":"2019-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49667762","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}

{"title":"Should Taxable Investors Shun Dividends?","authors":"Ronen Israel, Joseph Liberman, Nathan Sosner, Lixin Wang","doi":"10.3905/jwm.2019.1.080","DOIUrl":"https://doi.org/10.3905/jwm.2019.1.080","url":null,"abstract":"While the benefits of capital gains management to the tax efficiency of investment strategies have been extensively documented in the literature, evidence on the benefits of avoiding high-dividend-paying stocks is less conclusive. We evaluate the tax benefit of dividend avoidance for quantitative multi-style strategies and find that it generally reduces implementation efficiency, thus lowering expected pre-tax returns. The reduction in implementation efficiency is particularly pronounced for strategies with naturally higher dividend yields, such as those with a large exposure to the value style. Importantly, dividend avoidance detracts from the ability to manage capital gains. All things considered, the tax benefit of lowering the dividend yield is not enough to compensate for the associated increase in capital gains taxes and decrease in expected pre-tax returns. TOPICS: Factor-based models, equity portfolio management Key Findings • We find that dividend avoidance generally reduces implementation efficiency of quantitative multi-style strategies, thus lowering their expected pre-tax returns. The reduction in implementation efficiency is particularly pronounced for strategies with naturally higher dividend yields, such as strategies with a large exposure to the value style. • Moreover, dividend avoidance detracts from the ability to manage capital gains. • All things considered, we conclude that the tax benefit of lowering the dividend yield is not enough to compensate for the associated increase in capital gains taxes and decrease in expected pre-tax returns.","PeriodicalId":39998,"journal":{"name":"Journal of Wealth Management","volume":"22 1","pages":"49 - 69"},"PeriodicalIF":0.0,"publicationDate":"2019-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47002577","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}

{"title":"Mutual Funds are Subject to Market Risks: Empirical Evidence From India","authors":"Sonali Agarwal","doi":"10.3905/jwm.2019.22.2.066","DOIUrl":"https://doi.org/10.3905/jwm.2019.22.2.066","url":null,"abstract":"Academicians and investigators all over the world examine the effects of various macroeconomic variables on security markets, but studies on the repercussions for portfolios are not prominent. This study attempts to address this aspect by performing an exploratory, longitudinal study on 41 mutual funds (belonging to two categories, energy funds and gold funds). Using three-year daily net asset values (NAVs) of these funds and daily values of nine selected macroeconomic variables, the study analyzes the data using time-series nonstationary methods to explore the impact of macroeconomic variables on the chosen funds. The macroeconomic variables were found to affect both fund types, but in different ways. Investment in energy funds changed whenever there was a change in money supply. A positive effect was seen on gold fund NAVs with a change in interest rates. The major impact came from own-fund information when excited by shocks of one standard deviation. The study establishes causality between various mutual funds and the chosen macroeconomic variables. This study accentuates the interrelationship between the macro-economy and the stock market and stresses the need for investors as well as fund managers to understand the global scenario in order to make profitable deals. This insight could also help in developing better fund schemes. TOPICS: Commodities, mutual fund performance, emerging markets","PeriodicalId":39998,"journal":{"name":"Journal of Wealth Management","volume":"22 1","pages":"66 - 85"},"PeriodicalIF":0.0,"publicationDate":"2019-07-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46401477","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}

{"title":"The World Has Changed: Investing in the New Economy","authors":"Jeffrey B. Madden","doi":"10.3905/jwm.2019.1.076","DOIUrl":"https://doi.org/10.3905/jwm.2019.1.076","url":null,"abstract":"Today’s higher proportion of investments in intangible assets versus tangible assets is emblematic of a structural change in value creation. Investors have experienced that the digital network effects and other changes of the “New Economy” provide a different path for big winners, unlike that of the “Old Economy.” Moreover, the deterioration in the usefulness of generally accepted accounting principles (GAAP) accounting in general, and price/earnings ratio (P/E) in particular, pose a significant problem for investors. However, there is a sizable opportunity to be found by focusing on what has not changed. That is, the long-term life-cycle performance of firms is driven by the interplay of managerial skill (especially for nurturing a firm’s knowledge-building proficiency) and competition. This life-cycle framework is a uniquely useful guide for investors to navigate the New Economy. A key ingredient is a firm’s economic returns adjusted for GAAP deficiencies, for example, capitalization of research & development expenditures. This article provides an example of how life-cycle thinking leads to practical investment insights along with a case study of IDEXX Laboratories. This example represents the type of analysis needed to generate alpha via a portfolio of firms with skills attuned to the New Economy. TOPICS: Security analysis and valuation, portfolio construction, performance measurement","PeriodicalId":39998,"journal":{"name":"Journal of Wealth Management","volume":"22 1","pages":"87 - 98"},"PeriodicalIF":0.0,"publicationDate":"2019-07-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45948997","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}

{"title":"How Much Is Behavioral Advice Worth?","authors":"Michael M. Pompian","doi":"10.3905/JWM.2019.1.077","DOIUrl":"https://doi.org/10.3905/JWM.2019.1.077","url":null,"abstract":"Behavioral finance is a powerful tool when used effectively by investors and financial advisers. Although this usefulness is generally accepted in theory, the practical value of behavioral advice to investors has not been quantified to a large degree. The article provides a quantitative analysis of behavioral mistakes using a fictional case study of a private family that is making two key behavioral mistakes: loss aversion and mental accounting. First, these biases are explained, with examples. Next, the case study illustrates and quantifies investment losses due to behavioral mistakes. The key conclusion of the case study is that making behavioral mistakes causes investors to forgo returns, and this loss of return can be significant. However, if advisers and investors can recognize and correct behavioral mistakes, recouping or avoiding these gains is possible; these losses are not necessary. In sum, the value of behavioral advice is significant. TOPICS: Wealth management, long-term/retirement investing","PeriodicalId":39998,"journal":{"name":"Journal of Wealth Management","volume":"22 1","pages":"10 - 19"},"PeriodicalIF":0.0,"publicationDate":"2019-07-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48158558","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}