Abstracts - Financial Services Review

Abstracts:

Financial Services Review
Volume 8 Number 1, 1999

GENDER DIFFERENCES IN DEFINED CONTRIBUTION PENSION DECISIONS (pp. 1-10)
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Vickie L. Bajtelsmit, Alexandra Bernasek, Nancy A. Jianakoplos

ABSTRACT
This paper considers gender differences in allocation of household wealth to defined contribution pensions. Using data from the 1989 Survey of Consumer Finances, we estimate the coefficient of relative risk aversion based on the allocation of wealth into defined contribution pensions. Unlike previous studies, we consider the problem in the context of the household’s overall portfolio. We find that women exhibit greater relative risk aversion in their allocation of wealth into defined contribution pension assets.

INTERNATIONAL EQUITY DIVERSIFICATION AND SHORTFALL RISK (pp. 11-25)
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Kwok Ho, Moshe Arye Milevsky, Chris Robinson

ABSTRACT
International equity diversification benefits Canadian investors very substantially by reducing shortfall risk, as shown by results of a model that minimizes the risk of shortfall from a desired consumption level for a retired investor with an unknown date of death and stochastic investment returns. It does not benefit American investors materially. The United States equity market is a large proportion of the international equity market that is available to individual investors, and United States returns are highly correlated with other markets.

INTERNATIONAL INDEX FUNDS AND THE INVESTMENT PORTFOLIO (pp. 27-35)
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Scott Aiello

ABSTRACT
Financial advisers often recommend that investors diversify their investments internationally and also use the mutual funds with the lowest expenses. Recently it has been possible to use both of these strategies by purchasing an international index fund. This study evaluates international index funds as a means of portfolio diversification. Performance is evaluated using monthly return data on nine international indexes from January 1989 through December 1997. The returns are measured against the S&P 500 index returns. The results of the statistical tests suggest that international index investing does not offer superior returns compared to the S&P 500 index but that significant diversification benefits do exist.

A NINETIES PERSPECTIVE ON INTERNATIONAL DIVERSIFICATION (pp. 37-45)
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Micahel E. Hanna, Joseph P. McCormack, Grady Perdue

ABSTRACT
Investors often look to international diversification as a means to reduce the risk of a stock portfolio while maintaining a given level of return. In this study we look at ten years of historical data from the stock markets in G-7 countries. We see how diversification from an S&P 500 portfolio into a two-market (two-country) portfolio would have impacted the risk and return. Across this ten-year period, we find that a portfolio consisting solely of the S&P 500 dominates any portfolio that can be constructed from the S&P 500 and the market index of the G-7 countries.

FAMILY FRIENDLY FIRMS: DOES IT PAY TO CARE? (pp. 47-60) DOWNLOAD FULL-TEXT ARTICLE
Dianna C. Preece, Greg Filbeck

ABSTRACT
In this paper we examine the returns to a portfolio of 29 firms that are perceived as family- oriented. The sample is based on firms awarded the best 100 companies for working mothers in Working Mother Magazine’s annual survey. There is much anecdotal evidence supporting the benefits of these programs, but little evidence relating family-oriented policies to shareholder wealth. We find, based on raw returns, that family-friendly firms do not earn statistically significant excess returns relative to a matched sample or to the S&P 500. Based on risk-adjusted returns, the family-friendly portfolio outperforms the market, but underperforms a matched sample portfolio.


THE JOURNAL OF INDIVIDUAL FINANCIAL MANAGEMENT
*Abstracts:* Financial Services Review Volume 8 Number 1, 1999 GENDER DIFFERENCES IN DEFINED CONTRIBUTION PENSION DECISIONS (pp. 1-10) DOWNLOAD FULL-TEXT ARTICLE Vickie L. Bajtelsmit, Alexandra Bernasek, Nancy A. Jianakoplos ABSTRACT This paper considers gender differences in allocation of household wealth to defined contribution pensions. Using data from the 1989 Survey of Consumer Finances, we estimate the coefficient of relative risk aversion based on the allocation of wealth into defined contribution pensions. Unlike previous studies, we consider the problem in the context of the household’s overall portfolio. We find that women exhibit greater relative risk aversion in their allocation of wealth into defined contribution pension assets. INTERNATIONAL EQUITY DIVERSIFICATION AND SHORTFALL RISK (pp. 11-25) DOWNLOAD FULL-TEXT ARTICLE Kwok Ho, Moshe Arye Milevsky, Chris Robinson ABSTRACT International equity diversification benefits Canadian investors very substantially by reducing shortfall risk, as shown by results of a model that minimizes the risk of shortfall from a desired consumption level for a retired investor with an unknown date of death and stochastic investment returns. It does not benefit American investors materially. The United States equity market is a large proportion of the international equity market that is available to individual investors, and United States returns are highly correlated with other markets. INTERNATIONAL INDEX FUNDS AND THE INVESTMENT PORTFOLIO (pp. 27-35) DOWNLOAD FULL-TEXT ARTICLE Scott Aiello ABSTRACT Financial advisers often recommend that investors diversify their investments internationally and also use the mutual funds with the lowest expenses. Recently it has been possible to use both of these strategies by purchasing an international index fund. This study evaluates international index funds as a means of portfolio diversification. Performance is evaluated using monthly return data on nine international indexes from January 1989 through December 1997. The returns are measured against the S&P 500 index returns. The results of the statistical tests suggest that international index investing does not offer superior returns compared to the S&P 500 index but that significant diversification benefits do exist. A NINETIES PERSPECTIVE ON INTERNATIONAL DIVERSIFICATION (pp. 37-45) DOWNLOAD FULL-TEXT ARTICLE Micahel E. Hanna, Joseph P. McCormack, Grady Perdue ABSTRACT Investors often look to international diversification as a means to reduce the risk of a stock portfolio while maintaining a given level of return. In this study we look at ten years of historical data from the stock markets in G-7 countries. We see how diversification from an S&P 500 portfolio into a two-market (two-country) portfolio would have impacted the risk and return. Across this ten-year period, we find that a portfolio consisting solely of the S&P 500 dominates any portfolio that can be constructed from the S&P 500 and the market index of the G-7 countries. FAMILY FRIENDLY FIRMS: DOES IT PAY TO CARE? (pp. 47-60) DOWNLOAD FULL-TEXT ARTICLE Dianna C. Preece, Greg Filbeck ABSTRACT In this paper we examine the returns to a portfolio of 29 firms that are perceived as family- oriented. The sample is based on firms awarded the best 100 companies for working mothers in Working Mother Magazine’s annual survey. There is much anecdotal evidence supporting the benefits of these programs, but little evidence relating family-oriented policies to shareholder wealth. We find, based on raw returns, that family-friendly firms do not earn statistically significant excess returns relative to a matched sample or to the S&P 500. Based on risk-adjusted returns, the family-friendly portfolio outperforms the market, but underperforms a matched sample portfolio.