1,721,034 research outputs found
Appropriateness of Default Investment Options in Defined Contribution Plans: The Australian Evidence
Get PDFFor participants in defined contribution (DC) plans who refrain from exercising investment choice, plan contributions are invested following the default investment option of their respective plans. Since default investment options of different plans vary widely in terms of their benchmark asset allocation, the most important determinant of investment performance, participants enrolled in these options face significantly different wealth outcomes at retirement. This paper simulates the terminal wealth outcomes under different static asset allocation strategies to evaluate their relative appeal as default investment choice in DC plans. We find that strategies with moderate allocation to stocks are consistently outperformed in terms of upside potential of exceeding the participant’s wealth accumulation target at retirement as well as downside risk of falling below that target outcome by very aggressive strategies whose allocation to stocks approach 100%. The risk of extremely adverse wealth outcomes for plan participants also does not appear to be very sensitive to asset allocation. Our evidence strongly suggests the appropriateness of strategies heavily tilted towards stocks to be nominated as default investment options in DC plans unless plan providers emphasize predictability of wealth outcomes over adequacy of retirement wealth
The Case for Gender-Sensitive Superannuation Plan Design
No full text"A key feature of superannuation plan design is the assumption that members have long and continuous periods of employment over which contributions are made. This heroic design feature has led to debate on the adequacy of superannuation plans for those with interrupted employment, particularly the adverse impacts this has on the retirement income prospects of women. This paper employs non-parametric stochastic simulation to investigate two possible solutions to gender inequality in superannuation, higher contribution rates and more aggressive asset allocation. Our results suggest that while both these strategies in isolation are effective in reducing the current gender disparity in superannuation outcomes, they demand significant changes to current arrangements when employed individually to address the problem. A combined approach is found to be more powerful in ensuring a more equitable superannuation outcome for women, as it nullifies the relative disadvantage of interrupted employment with only modest changes to contribution rates and asset allocation." Copyright (c)2009 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.
Does fundamental indexation lead to better risk-adjusted returns? New evidence from Australian Securities Exchange
No full textWe investigate the claims of superiority of fundamental indexation strategy over capitalisation-weighted indexation by using data for Australian Securities Exchange (ASX) listed stocks. Whilst our results are in line with the outperformance observed in other geographical markets, we find that the excess returns from fundamental indexation in Australian market are much higher. On a rolling 5-year basis, the fundamental index always outperforms the capitalisation-weighted index. Our results suggest that superior performance of fundamental indexation could not be entirely attributed to value, size, or momentum effects. The outperformance persists even after adjusting for slightly higher transaction costs related to turnover
Driver response times to auditory, visual, and tactile take-over requests: A simulator study with 101participants
No full textConditionally automated driving systems may soon be available on the market. Even though these systems exempt drivers from the driving task for extended periods of time, drivers are expected to take back control when the automation issues a so-called take-over request. This study investigated the interaction between take-over request modality and type of non-driving task, regarding the driver's reaction time. It was hypothesized that reaction times are higher when the non-driving task and the take-over request use the same modality. For example, auditory take-over requests were expected to be relatively ineffective in situations in which the driver is making a phone call. 101 participants, divided into three groups, performed one of three non-driving tasks, namely reading (i.e., visual task), calling (auditory task), or watching a video (visual/auditory task). Results showed that auditory and tactile take-over requests yielded overall faster reactions than visual take-over requests. The expected interaction between takeover modality and the dominant modality of the non-driving task was not found. As for self-reported usefulness, auditory and tactile take-over requests yielded higher scores than visual ones. In conclusion, it seems that auditory and tactile stimuli are equally effective as take-over requests, regardless of the non-driving task. Further study into the effects of realistic non-driving tasks is needed to identify which non-driving tasks are detrimental to safety in automated driving.Green Open Access added to TU Delft Institutional Repository ‘You share, we take care!’ – Taverne project https://www.openaccess.nl/en/you-share-we-take-care Otherwise as indicated in the copyright section: the publisher is the copyright holder of this work and the author uses the Dutch legislation to make this work public.Biomechatronics & Human-Machine Contro
A human-like steering model: Sensitive to uncertainty in the environment
No full textThe interaction between a human driver and an automated driving system may improve when the automation is designed in such a way that it behaves in a human-like manner. This paper introduces a human-like steering model, in which the driver adapts to the risk due to uncertainty in the environment. Current steering models take a risk-neutral approach, while the fields of economics and sensorimotor control suggest that humans exhibit risk-sensitive behavior. The proposed model uses a risk-sensitive optimal feedback control structure to predict steering behavior. The paper studies the effect of the risksensitivity parameter and compares the prediction of the riskneutral and risk-sensitive controllers in a simulated abstraction of two scenarios: (a) driving while being subjected to lateral wind gusts and (b) overtaking an unpredictably swerving car. The simulation results show that the risk-sensitive model adapts to the uncertainty in the environment. Experimental data will be needed to validate the predictions of our model.Green Open Access added to TU Delft Institutional Repository ‘You share, we take care!’ – Taverne project https://www.openaccess.nl/en/you-share-we-take-care Otherwise as indicated in the copyright section: the publisher is the copyright holder of this work and the author uses the Dutch legislation to make this work public.Human-Robot InteractionBiomechatronics & Human-Machine Contro
Towards a dynamic asset allocation framework for target retirement funds: getting rid of the dogma in lifecycle investing
No full textThe Appropriateness of Default Investment Options in Defined Contribution Plans: Australian Evidence
Get PDFFor participants in defined contribution (DC) plans who refrain from exercising investment choice, plan contributions are invested following the default investment option of their respective plans. Since default investment options of different plans vary widely in terms of their benchmark asset allocation, the most important determinant of investment performance, participants enrolled in these options face significantly different wealth outcomes at retirement. This paper simulates the terminal wealth outcomes under different static asset allocation strategies to evaluate their relative appeal as default investment choice in DC plans. We find that strategies with moderate allocation to stocks are consistently outperformed in terms of upside potential of exceeding the participant's wealth accumulation target at retirement as well as downside risk of falling below that target outcome by very aggressive strategies whose allocation to stocks approach 100%. The risk of extremely adverse wealth outcomes for plan participants also does not appear to be very sensitive to asset allocation. Our evidence suggests the appropriateness of strategies heavily tilted towards stocks to be nominated as default investment options in DC plans unless plan providers emphasize predictability of wealth outcomes over adequacy of retirement wealth.Full Tex
Portfolio Size Effect in Retirement Accounts: What Does It Imply for Lifecycle Asset Allocation Funds?
No full textLifecycle funds offered by retirement plan providers allocate aggressively to risky asset classes when the employee participants are young, gradually switching to more conservative asset classes as they grow older and approach retirement. This approach focuses on maximizing growth of the accumulation fund in the initial years and preserving its value in the later years. The authors simulate terminal wealth outcomes based on conventional lifecycle asset allocation rules as well as on contrarian strategies that reverse the direction of asset switching. The evidence suggests that the growth in portfolio size over time significantly impacts the asset allocation decision. Due to the portfolio size effect that is observed by the authors, the terminal value of accumulation in retirement accounts is influenced more by the asset allocation strategy adopted in later years relative to that adopted in early years. By mechanistically switching to conservative assets in the later years of a plan, lifecycle strategies sacrifice significant growth opportunity and prove counterproductive to the participant's wealth accumulation objective. The authors' conclude that this sacrifice does not seem to be compensated adequately in terms of reducing the risk of potentially adverse outcomes.Full Tex
The performance of diversified emerging market equity funds
No full textWe investigate the performance of globally diversified emerging market equity funds during the first decade of the twenty-first century. A vast majority of these funds do not outperform the market benchmark even before transaction costs. The systematic risk of most of the funds is similar to that of the market benchmark portfolio, which may suggest that they aim to offer diversification benefits rather than seeking superior risk-adjusted returns through active management. We do not find any evidence of market timing ability amongst these funds. Finally, whilst we detect persistence in performance, this result is driven mainly by the poorly performing funds
Impact of persistent bad returns and volatility on retirement outcomes
No full text<b>Highlights</b>\ud
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- While poor equity returns are accompanied by increased volatility, the reverse is not true.\ud
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- If bad returns are encountered early in retirement, there is sharp escalation in risk of ruin. In contrast, poor returns at late retirement stage have minimal impact on the risk of sustenance.\ud
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- Market volatility in early retirement years leads to the highest (lowest) increase in wealth (risk of ruin) while these positive effects are subdued if such conditions prevail in later years.\ud
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- Portfolio allocation to equities is generally beneficial to investors in retirement. Little or no investment in equities results in depletion of wealth and increases the risk of ruin.\ud
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<b>Abstract</b>\ud
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We examine wealth outcomes and risk of ruin faced by retirees due to persistent bad re- turns and high volatility in equity markets occurring at different stages of their retirement. Our results show poor equity returns persisting over long periods can put retirement security to serious risk but volatile market conditions actually have the opposite impact. The timing of such persistent bad returns and volatility (early or late stages of retirement) is critical and has differing effects on retirement outcomes. The results are robust to varying portfolio allocations to equities although the precise impacts are different
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