High Return Assets Research Articles

How well prepared are Australian dentists for retirement? A survey of practitioners aged 50 and above

To determine how financially prepared Australian dentists are for retirement. Information was collected in the Dentist Retirement Intentions Study from members of the New South Wales branch of the Australian Dental Association, all of whom were aged over 50 years. One way ANOVAs were used to test for differences between groups of variables. A forward stepwise multivariate regression identified predictors of the expected value of savings at retirement. It was found that while there was variation in preferred retirement income, there was general agreement that this preferred retirement income would be achieved. Current assets mostly totalled between dollars 250,000 and dollars 2 million (Australian dollars), with 35% of assets held in the family home. However, 7% of dentists had no net savings or were in net debt. Half the surveyed dentists predicted their savings at retirement to be more than $2 million. Superannuation was the most commonly cited predicted source of retirement funding. Most, but not all, dentists are generally well prepared for retirement. They have a significant amount of wealth, which is above that generally recommended for a comfortable living standard in retirement in Australia, they have this wealth stored in easily accessed, high return assets, and they also intend to spend this wealth on financing their retirement rather than running down their capital.

WITHDRAWN: Venture capital decision based on FPGA and machine learning

Abstract Venture capital decision based Machine Learning is the Intelligence is a way to build, economic and execute stock market that allow you to make your own decisions. Global market intelligence technology attracts a wide range of people by making it an essential adaptation of various industries internal activities. It accelerates all internal (external or internal) tasks by increasing the focus on data-based decision-making methods. The traditional sub-sectors of the financial services venture capital industry have a lot to do with human interaction. Venture capital investment is considered a high-risk, high-return asset class. In the previous method based on IOT (Internet of Thing) and data mining for Venture capital decision. The existing method gives the data security, personal security, low data monitoring. The proposed method is based on FPGA (Field Programmable Gate Arrays) and Machine learning for Venture capital decision. Venture investment decisions can use machine learning to apply pre-optimized transactions, company data, founder data, etc. Understand how venture capitalists use artificial intelligence tools and methods to improve venture capital decisions. By focusing on the following eight value chain areas involved in commercial procurement, contract selection, valuation, transaction formation, post-investment appreciation, termination, and the company's internal and external enterprise-decision-making venture capital to improve human decision-making in the venture capital industry FPGA (Field Programmable Gate Arrays) tools and machine learning techniques can be used to Determine how to use artificial intelligence in such critical scenarios and venture capital decisions and the advantages and disadvantages of using artificial intelligence systems.

The Effects of Income Tax Timing on Retirement Investment Decisions

ABSTRACTIn an online experiment, the immediate (Roth) versus deferred taxation of retirement income affects taxpayers' investment decisions such that tax-deferred plan investors under-adjust for future tax burdens and overestimate their future wealth compared to Roth investors. When presented with a specific after-tax monetary goal, Roth account holders invest more in higher-risk, higher-return assets than tax-deferred account holders. We investigate four aspects of this investment context that could alleviate these differences: (1) implementing a “do-your-best” goal, (2) reframing specific goals in pre-tax dollars, (3) explicitly prompting investors to estimate future tax burdens, and (4) providing performance feedback. These interventions reduce differences between Roth and tax-deferred investor behaviors, but do not entirely close the gap on their own. In combination, reframing goals and prompting future tax estimations encourage tax-deferred account holders to invest in risky assets to the same degree as Roth investors only when paired with performance feedback.

Saving and the Effectiveness of Financial Education

In this paper, I examine the financial situation of older households. In addition, I examine whether employers’ initiatives to reduce planning costs via retirement seminars have an effect on workers’ saving. Using data from the Health and Retirement Study, I first show that many families arrive close to retirement with little or no wealth. Portfolios are also rather simple, and many families, particularly those with low education, hold little or no high-return assets. I further show that seminars foster saving. This is particularly the case for those with low education and those who save little. By offering financial education, both financial and total net worth increase sharply, particularly for families at the bottom of the wealth distribution and those with low education. Retirement seminars also increase total wealth (inclusive of pension and Social Security) for both high and low education families. Taken together, this evidence suggests that retirement seminars can foster wealth accumulation and bolster financial security in retirement.

Gold price and exchange rates: A panel smooth transition regression model for the G7 countries

In this paper we investigate whether the price of gold is affected by internal and external macroeconomic performance, which is mainly reflected in exchange rate movements. Based on the G7 countries and using annual data for the period 1980–2016, we test the impact of the effective exchange rate and the interest rate on the price of gold. Departing from previous studies, we propose that the observed exchange rate should be taken into account in accordance with the equilibrium value of the currency and the implied misalignment. Τhe equilibrium real effective exchange rate is estimated using recent panel cointegration techniques, which are strengthened with the theoretical assumptions of an external balance model. Next, we estimate a two-regime Panel Smooth Transition Regression model with a monotonic transition function to capture the nonlinear dependency between the gold price and the macroeconomic variables. Our results show that investors tend to invest in gold as the misalignment rate of the real effective exchange rate increases. Furthermore, when the interest rate increase is rather high, investors are less willing to sell gold for higher return assets. Overall, our evidence confirms that gold serves as a hedge only when financial risk is high.

RESPONDING TO THE INFLATION TAX

We adopt mechanism design to study the effects of inflation on output, trade, and capital accumulation. Our theory captures multiple channels for individuals to respond to inflation: search intensity, market participation, and substitution between money and a higher return asset. We characterize constrained efficient allocations and show inflation has nonmonotonic effects on the frequency of trades (extensive margin) and the total quantity traded (intensive margin). The model features monetary superneutrality for low inflation rates, nonlinearities in trading frequencies, and substitution of money for capital for higher inflation rates. While these effects are difficult to capture in previous models, we show how they are intimately related by all being features of an optimal trading mechanism.

Stochastic Dominance and Omega Ratio: Measures to Examine Market Efficiency, Arbitrage Opportunity, and Anomaly

Both stochastic dominance and Omegaratio can be used to examine whether the market is efficient, whether there is any arbitrage opportunity in the market and whether there is any anomaly in the market. In this paper, we first study the relationship between stochastic dominance and the Omega ratio. We find that second-order stochastic dominance (SD) and/or second-order risk-seeking SD (RSD) alone for any two prospects is not sufficient to imply Omega ratio dominance insofar that the Omega ratio of one asset is always greater than that of the other one. We extend the theory of risk measures by proving that the preference of second-order SD implies the preference of the corresponding Omega ratios only when the return threshold is less than the mean of the higher return asset. On the other hand, the preference of the second-order RSD implies the preference of the corresponding Omega ratios only when the return threshold is larger than the mean of the smaller return asset. Nonetheless, first-order SD does imply Omega ratio dominance. Thereafter, we apply the theory developed in this paper to examine the relationship between property size and property investment in the Hong Kong real estate market. We conclude that the Hong Kong real estate market is not efficient and there are expected arbitrage opportunities and anomalies in the Hong Kong real estate market. Our findings are useful for investors and policy makers in real estate.

Debt enforcement and the value of money

This paper presents a framework in which fiat money has value in equilibrium even though a risk-free higher-return asset can be equally used as a medium of exchange. In a limited-commitment environment, agents may prefer to borrow a low-return asset because that results in a larger borrowing capacity. Thus, a monetary equilibrium in which money is dominated in rate of return exists.

Stochastic Dominance and Omega Ratio: Measures to Examine Market Efficiency, Arbitrage Opportunity, and Anomaly

Both stochastic dominance and Omega ratio can be used to examine whether market is efficient, whether there is any arbitrage opportunity in the market, and whether there is any anomaly in the market. In this paper, we first study relationship between stochastic dominance and Omega ratio. We find that second-order stochastic dominance (SD) and/or second-order risk-seeking SD (RSD) alone for any two prospects is not sufficient to imply Omega-ratio dominance insofar that the Omega ratio of one asset is always greater than that of the other one. We extend the theory of risk measures by proving that the preference of second-order SD implies the preference of the corresponding Omega ratios only when the return threshold is less than the mean of the higher-return asset. On the other hand, the preference of the second-order RSD implies the preference of the corresponding Omega ratios only when the return threshold is larger than the mean of the smaller-return asset. Nonetheless, first-order SD does imply Omega-ratio dominance. Thereafter, we apply the theory developed in this paper to examine the relationship between property size and property investment in the Hong Kong real estate market. We conclude that the Hong Kong real estate market is not efficient and there are expected arbitrage opportunity and anomaly in the Hong Kong real estate market. Our findings are useful for investors and policy makers in real estate.

A Note on Stochastic Dominance and the Omega Ratio

We first show that second-order stochastic dominance (SSD) and/or second-order risk-seeking stochastic dominance (SRSD) alone for any two prospects is not sufficient to imply the Omega ratio of one asset is always greater than that of the other one. We then extend the theory of risk measures by proving that the preference of second-order stochastic dominance implies the preference of the corresponding Omega ratios only when the return threshold is less than the mean of the higher-return asset. On the other hand, the preference of second-order risk-seeking stochastic dominance implies the preference of the corresponding Omega ratios only when the return threshold is bigger than the mean of the smaller-return asset. Nonetheless, the preference of first-order stochastic dominance does imply the preference of the corresponding Omega ratios for any return threshold.

A Theory on Origin of Speculative Bubbles and Public Debt Accumulation

I define a speculative bubble as the phenomenon in which zero expected return assets possess positive economic values. The limited liability principle matters in such a case. Individual investors prefer higher risk and higher return assets under limited liability, and they become incautious about the downside risk. Accordingly, even the zero expected return assets have a positive market value. However, we must note that some substantial amount of government subsidies should be introduced into the market to penetrate the limited liability principle. As circulating such assets implies the prevalence of economy-wide zero-sum game, if we presume the limited liability principle, additional provision of an official subsidy is unavoidable to finance the private positive gains. This finding implies that the precariousness of whether a speculative bubble emerges vitally depends on the fiscal discipline of a government. Whenever investors foresee a government’s forbearing policy, they invest in riskier zero-sum assets, and there emerges a more violent speculative bubble. In such a case, a huge amount of public debt is accumulated as a result of the government’s aids. I negate not only the Ricardian equivalence theorem under non-altruistic individuals but also the Lerner’s assertion that alleges the issuance of a public debt to be irrelevant to the future resource allocation. Therefore, speculative bubbles genetically distort the intergenerational resource allocation, and hence, intergenerational ethic on the macroeconomic policy should be urgently established.

Dynamics of Assets, Liquidity, and Inequality in Economies with Decentralized Markets

An algorithm for computing Dynamic Nash Equilibria (DNE) in an extended version of Kiyotaki and Wright (1989) (hereafter KW) is proposed. The algorithm computes the equilibrium profile of (pure) strategies and the evolution of the distribution of three types of assets across three types of individuals.It has two features that together make it applicable in a wide range of macroeconomic experiments: (i) it works for any feasible initial distribution of assets; (ii) it allows for multiple switches of trading strategies along the transitional dynamics.The algorithm is used to study the relationship between liquidity, production, and inequality in income and in welfare, in economies where assets fetch different returns and agents have heterogeneous skills and preferences.One experiment shows a case of reversal of fortune. An economy endowed with a low-return asset takes over a similar economy endowed with a high-return asset because, in the former economy, a group of agents abandon a rent-seeking trading behavior and increase their income by trading and producing more intensively. A second experiment shows that a reduction of market frictions leads both to higher income and lower inequality. Other experiments evaluate the propagation mechanism of shocks that hit the assets' returns.A key result is that trade and liquidity tend to squeeze income inequality.

On the coexistence of money and higher-return assets and its social role

This paper adopts mechanism design to investigate the coexistence of …at money and higherreturn assets. We consider an economy with pairwise meetings where …at money and riskfree capital compete as means of payment, as in Lagos and Rocheteau (2008). The trading mechanism in pairwise meetings is chosen among all individually rational, renegotiation-proof mechanisms to maximize society’s welfare. We show that in any stationary monetary equilibrium capital commands a higher rate of return than …at money.

Imperfect recognizability and coexistence of money and higher-return assets

Existing solutions to the problem of coexistence of money and higher-return substitutes that rely on imperfect recognizability of the substitutes adopt extreme assumptions: they either have a zero cost of counterfeiting the substitutes or omit plausible refinements that would rule out pooling equilibria. Here coexistence is obtained with a general distribution of positive counterfeiting costs within a signaling-game framework in which the intuitive criterion is invoked. Moreover, if the cost of counterfeiting is small, then any monetary equilibrium that satisfies the intuitive criterion necessarily exhibits coexistence. A continuity assumption on off-equilibrium beliefs is also considered. It is satisfied by equilibria with small use of substitutes, but not by cash-in-advance equilibria.

Debt Enforcement and the Return on Money

The rate-of-return-dominance puzzle asks why low-return assets, like fiat money, are used in actual economies given that risk-free higher-return assets are available. As long as this question remains unresolved, most conclusions from monetary models which arbitrarily restrict the marketability properties of alternative assets to make money valuable are difficult to assess. In this paper, I provide a framework in which fiat money has value in equilibrium, even though a higher-return asset is available and there are neither restrictions nor transaction costs in using it. I suggest that the use of money is associated with frictions underlying debt contracts. In an environment where full enforcement is not feasible, the actual rate of return on assets is determined by incentives eliciting voluntary debt repayment. I show that the inflation rate or, more generally, the depreciation rate of an asset in which debts are denominated may function as a commitment device. As a result, money is used in equilibrium and the optimal inflation rate is positive.

Stochastic Optimization Applied to Self-Financing Portfolio: Does Bequest Matter?

The paper studies stochastic optimization of an intertemporal consumption model to allocate financial assets between risky and risk-free assets. We use a stochastic optimization technique, in which utility is maximized subject to a self-financing portfolio constraint. The papers in literature have estimated the errors of Euler equations using data from financial markets. It has been shown that it is sufficient to test the first order Euler equation implied by the model. However, they all assume a constant consumption-wealth ratio that constrains the boundary conditions, hence influencing the coefficient of the risk premium. The main contribution of our paper is that we drop the assumption of a constant consumption-wealth ratio. We have an analytical solution using a utility maximization model with a stochastic self-financing portfolio. We introduce a terminal condition of wealth with and without bequests. We also simulate the stochastic optimization with a self-financing portfolio, distinguishing risk neutral investors (flow) from high risk averse investors (high). We show that the model with bequest has a higher level of wealth and a smoother decline of consumption over time than the model with no bequest at the end of the period. The model with no bequest has the same level of consumption and a sharp fall at the end of the period. Risk averse agents with high return assets have a higher amount of wealth than risk-neutral agents with lower return assets.

Dynamic Correlations Among Asset Classes: REIT and Stock Returns

We use the Dynamic Conditional Correlation model with Generalized Autoregressive Conditional Heteroskedasticity (DCC-GARCH) developed by Engle (Journal of Business & Economic Statistics 20(3):339–350, 2002) to examine dynamics in the correlation of returns between publicly traded REITs and non-REIT stocks. The results suggest that REIT-stock correlations form three distinct periods. During the first period, ending in August 1991 with the start of the modern REIT era, correlations were high and without trend, never dipping below 59%. During the second period, ending in September 2001 with the inclusion of REITs in broad stock market indexes, correlations declined precipitously to 30%, enabling substantially higher portfolio allocations to both high-return asset classes and therefore higher portfolio returns without increasing portfolio volatility. During the third period, since September 2001, correlations increased steadily but only reached 59% in late 2008. A simple portfolio optimization suggests that asset managers would be willing to pay 20 basis points per year, plus the difference in transaction costs, for the ability to use DCC-GARCH modeling of dynamic correlations in place of rolling 24-month asset correlations.

On the Coexistence of Money and Higher-Return Assets and its Social Role

This paper adopts mechanism design to tackle the central issue in monetary theory, namely, the coexistence of money and higher-return assets. I describe an economy with pairwise meetings, where fiat money and risk-free capital compete as means of payment. Whenever fiat money has an essential role, any constrained-efficient allocation is such that capital commands a higher rate of return than fiat money.

Stochastic optimization applied to self-financing portfolio: does bequest matter?

The article studies stochastic optimization of an intertemporal consumption model to allocate financial assets between risky and risk-free assets. We use a stochastic optimization technique, in which utility is maximized subject to a self-financing portfolio constraint. The papers in literature have estimated the errors of Euler equations using data from financial markets. It has been shown that it is sufficient to test the first order Euler equation implied by the model. However, they all assume a constant consumption–wealth ratio that constrains the boundary conditions, hence influencing the coefficient of the risk premium. The main contribution of our article is that we drop the assumption of a constant consumption–wealth ratio. We have an analytical solution using a utility maximization model with a stochastic self-financing portfolio. We introduce a terminal condition of wealth with and without bequests. We also simulate the stochastic optimization with a self-financing portfolio, distinguishing risk neutral investors (γ-low) from high risk averse investors (γ-high). We show that the model with bequest has a higher level of wealth and a smoother decline of consumption over time than the model with no bequest at the end of the period. The model with no bequest has the same level of consumption and a sharp fall at the end of the period. Risk averse agents with high return assets have a higher amount of wealth than risk-neutral agents with lower return assets.

Portfolio Reallocation and Exchange Rate Dynamics

Exchange rate is quoted by dealers based on the order flow they receive. Market survey and FX market microstructure literature suggest that financial customers order flow is the most informative and leads total order flow. This paper explains exchange rate dynamics by linking financial customers FX order flow with their dynamic portfolio allocation among domestic and foreign assets. Specifically, for any currency pair in a particular period, one currency has relatively higher assets return than the other and can be considered as high-return currency (HRC). Profit-seeking financial customers would hold more (less) HRC assets if their returns are expected to increase (decrease). Such portfolio reallocation generates positive (negative) order flow for the HRC and the currency appreciates (depreciates). Meanwhile, holding HRC assets is risky because of exchange rate fluctuations and higher volatility associated with high-return assets. Everything else equal, when financial customers become more risk-loving (risk-aversion), they would hold more (less) HRC assets, which causes positive (negative) order flow toward the HRC and the currency appreciates (depreciates). Thus, value of high-return currency (low-return currency) is positively (negatively) driven by expected returns of HRC assets and investors' risk appetite. The entire exchange rate dynamics is thus based directly on the financial market structure as opposed to traditional macroeconomic variables. As switch can occur in HRC status, business cycle and dominating factor, the direction that related financial variables affect exchange rate varies in different regimes. The paper finds country-specific period-specific supportive evidence for all major currencies in a long time period.