Abstracts - Financial Services Review

Abstracts:

Financial Services Review
Volume 2 Number 2, 1992/1993 (Index Issue)

An Index of Portfolio Diversification
(pp. 73-85) DOWNLOAD FULL-TEXT ARTICLE
Walt Woerheide, Don Persson

ABSTRACT
A recurring question in the literature concerning diversification is what is the minimum number of securities required to achieve adequate diversification. The problem is that studies on this topic assume equally distributed holdings. In reality, portfolios are not evenly divided. The purpose of this paper is to evaluate the ability of five different measures of diversification to provide meaningful information about the degree of diversification of an unevenly distributed stock portfolio. The complement of the Herfindahl index was found to be the best of the five measures and its explanatory power was deemed to be adequate for general use.

The Individual Investor in the Market: Forming a Belief Regarding Market Efficiency
(pp. 87-96) DOWNLOAD FULL-TEXT ARTICLE
Robert M. Peevey, Gene C. Uselton, John R. Moroney

ABSTRACT
Do the actions of investors drive the market toward efficiency or do investors utilize fads and other information unrelated to the true value of the security to drive the market away from efficiency? Investors have been forced to examine a multitude of challenges to the efficient markets hypothesis in recent years. One of the most formidable of the challenges is the "excessive market price volatility" argument. We examine this argument, as presented in the "variance bounds" literature, and conclude that, although markets may be inefficient, the "variance bounds" literature has not proved the case conclusively.

Performance and Risk Exposure of International Mutual Funds
(pp. 97-110) DOWNLOAD FULL-TEXT ARTICLE
Larry R. Lang, Robert M. Niendorf

ABSTRACT
This study examined whether internationally diversified mutual funds increased a U.S. investor's risk-adjusted return above that on a domestic benchmark mutual fund. Average returns on about one-half of the international funds exceeded the domestic benchmark fund's return. The risk-adjusted returns on the international mutual funds were not significantly different from that on the domestic benchmark fund. These results differ from earlier studies which generally found superior returns on international mutual funds. The benefits for the U.S. investor of holding an internationally diversified mutual fund appear to be limited for the period studied.

What Strategies Are Experienced Estate Planners Recommending? Evidence From Survey Data
(pp. 111-130) DOWNLOAD FULL-TEXT ARTICLE
Chris J. Prestopino

ABSTRACT
Responses from 124 experienced estate planning attorneys in 33 states reveal the frequency with which their 1991 clients undertook over forty estate planning techniques commonly promoted in practitioner literature. Nearly 83 percent of their clients had a net worth of at least $600,000, implying the need for careful consideration of these strategies. Among the most popular techniques implemented include the durable power of attorney for property, durable power of attorney for health care, living will, credit shelter bypass plan, standard QTIP trust, revocable living trust, and nonsimple will. Among the least popular techniques include flower bonds, private annuity, grantor retained unitrust, large custodial gift, and grantor retained annuity trust.

The Risks of Pension Plans
(pp. 131-156) DOWNLOAD FULL-TEXT ARTICLE
Robert W. McLeod, Sharon Moody, Aaron Phillips

ABSTRACT
This paper identifies and describes the risks to which the prospective pensioner is exposed. An understanding of the types of plans and the risks associated with each will assist the individual pensioner with making a proper analysis of the safety of his/her plan and acquaint the pensioner with the role of the Employee Retirement Income Security Act (ERISA) and the Pension Benefit Guaranty Corporation (PBCG) in safeguarding pension assets.


THE JOURNAL OF INDIVIDUAL FINANCIAL MANAGEMENT
*Abstracts:* Financial Services Review Volume 2 Number 2, 1992/1993 (Index Issue) An Index of Portfolio Diversification (pp. 73-85) DOWNLOAD FULL-TEXT ARTICLE Walt Woerheide, Don Persson ABSTRACT A recurring question in the literature concerning diversification is what is the minimum number of securities required to achieve adequate diversification. The problem is that studies on this topic assume equally distributed holdings. In reality, portfolios are not evenly divided. The purpose of this paper is to evaluate the ability of five different measures of diversification to provide meaningful information about the degree of diversification of an unevenly distributed stock portfolio. The complement of the Herfindahl index was found to be the best of the five measures and its explanatory power was deemed to be adequate for general use. The Individual Investor in the Market: Forming a Belief Regarding Market Efficiency (pp. 87-96) DOWNLOAD FULL-TEXT ARTICLE Robert M. Peevey, Gene C. Uselton, John R. Moroney ABSTRACT Do the actions of investors drive the market toward efficiency or do investors utilize fads and other information unrelated to the true value of the security to drive the market away from efficiency? Investors have been forced to examine a multitude of challenges to the efficient markets hypothesis in recent years. One of the most formidable of the challenges is the "excessive market price volatility" argument. We examine this argument, as presented in the "variance bounds" literature, and conclude that, although markets may be inefficient, the "variance bounds" literature has not proved the case conclusively. Performance and Risk Exposure of International Mutual Funds (pp. 97-110) DOWNLOAD FULL-TEXT ARTICLE Larry R. Lang, Robert M. Niendorf ABSTRACT This study examined whether internationally diversified mutual funds increased a U.S. investor's risk-adjusted return above that on a domestic benchmark mutual fund. Average returns on about one-half of the international funds exceeded the domestic benchmark fund's return. The risk-adjusted returns on the international mutual funds were not significantly different from that on the domestic benchmark fund. These results differ from earlier studies which generally found superior returns on international mutual funds. The benefits for the U.S. investor of holding an internationally diversified mutual fund appear to be limited for the period studied. What Strategies Are Experienced Estate Planners Recommending? Evidence From Survey Data (pp. 111-130) DOWNLOAD FULL-TEXT ARTICLE Chris J. Prestopino ABSTRACT Responses from 124 experienced estate planning attorneys in 33 states reveal the frequency with which their 1991 clients undertook over forty estate planning techniques commonly promoted in practitioner literature. Nearly 83 percent of their clients had a net worth of at least $600,000, implying the need for careful consideration of these strategies. Among the most popular techniques implemented include the durable power of attorney for property, durable power of attorney for health care, living will, credit shelter bypass plan, standard QTIP trust, revocable living trust, and nonsimple will. Among the least popular techniques include flower bonds, private annuity, grantor retained unitrust, large custodial gift, and grantor retained annuity trust. The Risks of Pension Plans (pp. 131-156) DOWNLOAD FULL-TEXT ARTICLE Robert W. McLeod, Sharon Moody, Aaron Phillips ABSTRACT This paper identifies and describes the risks to which the prospective pensioner is exposed. An understanding of the types of plans and the risks associated with each will assist the individual pensioner with making a proper analysis of the safety of his/her plan and acquaint the pensioner with the role of the Employee Retirement Income Security Act (ERISA) and the Pension Benefit Guaranty Corporation (PBCG) in safeguarding pension assets.