Summary Of Applications Research Articles

Practical Applications of The Value of Allocating to Annuities

<h3>Practical Applications Summary</h3> In <b><i>The Value of Allocating to Annuities</i></b>, from the Summer 2020 issue of <b><i>The Journal of Retirement</i></b>, author <b>David Blanchett of Morningstar Investment Management</b> explores the costs and benefits of including annuities in the mix of products financial advisors recommend to clients. Annuities have long been unpopular among investors and advisors, who perceive them as complex, expensive, and inflexible. But annuities provide one benefit other products cannot: guaranteed lifetime income. Blanchett says it is unwise to ignore this benefit, and investors and advisors should consider the relative cost of an annuity-inclusive vs. an investment-only strategy. Blanchett demonstrates that if advisors construct product mixes with moderate fees across annuities and investments, allocating an average of 30% to annuities generates an average alpha-equivalent benefit (that is, an additional return) of 0.73% relative to investment-only portfolios. Therefore, Blanchett says, advisors should educate themselves about annuities, to better identify the right annuity products and the clients for whom they make sense. <b>TOPICS:</b>Wealth management, retirement

Practical Applications of Investment Implications of the Rising and Falling Pattern of Marginal Tax Rates for Retirees

<h3>Practical Applications Summary</h3> In <b><i>Investment Implications of the Rising and Falling Pattern of Marginal Tax Rates for Retirees</i></b>, from the Summer 2020 issue of <b><i>The Journal of Retirement</i></b>, authors <b>William Reichenstein</b> (of <b>Social Security Solutions, Inc.</b> and <b>Retiree, Inc.</b>) and <b>William Meyer</b> (also of <b>Retiree, Inc.</b>) explore strategies for optimizing Medicare premiums and taxes. Medicare premiums are based on one’s income from two years earlier, and they rise sharply at certain income thresholds. Meanwhile, taxes on Social Security benefits cause marginal tax rates for middle-income retirees also to rise sharply on a wide range of income, and then drop sharply at still higher incomes. This humplike rise and fall in rates is called the <i>tax torpedo</i>. Reichenstein and Meyer argue that some retirees should convert assets in their tax-deferred accounts (TDAs) into Roth IRAs if their income is at or beyond the end of the tax torpedo, thus allowing them to achieve a lower tax rate on the converted assets. However, those who will be on Medicare two years hence may need to limit their Roth conversions to avoid increasing their future Medicare premiums. <b>TOPICS:</b>Wealth management, retirement, social security

A Review of Piezoelectric Vibration Energy Harvesting with Magnetic Coupling Based on Different Structural Characteristics.

Piezoelectric vibration energy harvesting technologies have attracted a lot of attention in recent decades, and the harvesters have been applied successfully in various fields, such as buildings, biomechanical and human motions. One important challenge is that the narrow frequency bandwidth of linear energy harvesting is inadequate to adapt the ambient vibrations, which are often random and broadband. Therefore, researchers have concentrated on developing efficient energy harvesters to realize broadband energy harvesting and improve energy-harvesting efficiency. Particularly, among these approaches, different types of energy harvesters adopting magnetic force have been designed with nonlinear characteristics for effective energy harvesting. This paper aims to review the main piezoelectric vibration energy harvesting technologies with magnetic coupling, and determine the potential benefits of magnetic force on energy-harvesting techniques. They are classified into five categories according to their different structural characteristics: monostable, bistable, multistable, magnetic plucking, and hybrid piezoelectric–electromagnetic energy harvesters. The operating principles and representative designs of each type are provided. Finally, a summary of practical applications is also shown. This review contributes to the widespread understanding of the role of magnetic force on piezoelectric vibration energy harvesting. It also provides a meaningful perspective on designing piezoelectric harvesters for improving energy-harvesting efficiency.

Practical Applications of The Use and Value of Financial Advice for Retirement Planning

<h3>Practical Applications Summary</h3> In <b>The Use and Value of Financial Advice for Retirement Planning</b>, from the Winter 2020 issue of <b><i>The Journal of Retirement</i>, W. Van Harlow</b>, formerly of <b>Empower Retirement</b>; <b>Keith Brown</b> of the <b>University of Texas</b>; and <b>Stephen Jenks</b> of <b>Empower Retirement</b> examined the characteristics of individuals who received professional advice for retirement planning and the economic value of the results. The authors surveyed more than 4,000 working households to assess their demographics as well as their investment and behavioral characteristics. The results reveal that the retirement income replacement earned by advised households tends to be 15 percentage points higher than that of unadvised households. <b>TOPICS:</b>Retirement, quantitative methods, portfolio construction

Practical Applications of The Pragmatics of Private Markets Investing

<h3>Practical Applications Summary</h3> In <b><i>The Pragmatics of Private Markets Investing</i></b> from the 2020 Fund Manager Selection special issue of <i>The Journal of Portfolio Management</i>, <b>Karl Polen</b>, chief investment officer of the <b>Arizona State Retirement System</b>, provides insights on private market investing from the vantage of nearly 40 years in the industry. Polen approaches private market investing from the perspective of investing in a business, and therefore he puts the emphasis on the private equity firm’s business strategy, company culture, and employees. Ultimately, private equity firms must also have fee structures that align with investor interests. <b>TOPIC:</b>Manager selection

Practical Applications of Three Pillars of Modern Responsible Investment

<h3>Practical Applications Summary</h3> In <b><i>Three Pillars of Modern Responsible Investment</i></b>, from the 2020 ESG Special Issue of <b><i>The Journal of Investing</i>, Lloyd Kurtz</b> of <b>Wells Fargo Private Wealth Management</b> dives into the three key tenets that support modern “responsible investment” activity. The first is <i>alignment</i> of portfolios with client interests. Alignment is usually accomplished through exclusions. The second is <i>integration</i> of environmental, social, and governance (ESG) factors into investment decision making. Integration emphasizes identifying factors that have a material influence on a company’s financial performance or valuation. The third is <i>impact</i>—achieving positive change though active ownership, usually in the form of engagement with corporate management. Evidence shows that exclusion-based alignment strategies can be applied without sacrificing the ability to closely track standard benchmarks. There is conflicting evidence as to whether asset managers can generate alpha based on integration of positive ESG factors, but somewhat stronger evidence exists to show that they can identify and manage risk based on negative ESG factors. Finally, some evidence supports the tenet that impact activities can produce improved financial results. <b>TOPICS:</b>ESG investing, portfolio theory, portfolio construction

Through your skin to your heart and brain: A critical evaluation of physiological methods in Cognitive Translation and Interpreting Studies

This article offers a critical appraisal of two experimental methods used to provide physiological measures of stress and emotions in translation and interpreting research, namely, the analysis of heart rate and heart rate variability, and skin conductance. This is a hands-on introduction to summarize information for fellow-researchers on what these methods are and what they tell us about our body and mind as well as to offer a comprehensive summary of practical applications and analysis standards. The first part of the article introduces the ways in which emotions are experienced and processed in the brain; it provides a framework for interpreting physiological arousal and its role in the perception and construction of emotions. The second part is structured in two parallel sections devoted to each of the two experimental methods. Both sections review existing research on these methods in Translation and Interpreting Studies and discuss the way in which each can best be used in experimental research. They offer suggestions on experiment planning, measurement, data analysis and data reporting. A final remark on ethics and triangulation is offered and some emerging challenges are addressed.

Practical Applications of Three Pillars of Modern Responsible Investment

<h3>Practical Applications Summary</h3> In <b><i>Three Pillars of Modern Responsible Investment</i></b>, from the 2020 ESG Special Issue of <b><i>The Journal of Investing</i>, Lloyd Kurtz</b> of <b>Wells Fargo Private Wealth Management</b> dives into the three key tenets that support modern “responsible investment” activity. The first is <i>alignment</i> of portfolios with client interests. Alignment is usually accomplished through exclusions. The second is <i>integration</i> of environmental, social, and governance (ESG) factors into investment decision making. Integration emphasizes identifying factors that have a material influence on a company’s financial performance or valuation. The third is <i>impact</i>—achieving positive change though active ownership, usually in the form of engagement with corporate management. Evidence shows that exclusion-based alignment strategies can be applied without sacrificing the ability to closely track standard benchmarks. There is conflicting evidence as to whether asset managers can generate alpha based on integration of positive ESG factors, but somewhat stronger evidence exists to show that they can identify and manage risk based on negative ESG factors. Finally, some evidence supports the tenet that impact activities can produce improved financial results. <b>TOPICS:</b>ESG investing, portfolio theory, portfolio construction

Practical Applications of Investment Implications of the Rising and Falling Pattern of Marginal Tax Rates for Retirees

<h3>Practical Applications Summary</h3> In <b><i>Investment Implications of the Rising and Falling Pattern of Marginal Tax Rates for Retirees</i></b>, from the Summer 2020 issue of <b><i>The Journal of Retirement</i></b>, authors <b>William Reichenstein</b> (of <b>Social Security Solutions, Inc.</b> and <b>Retiree, Inc.</b>) and <b>William Meyer</b> (also of <b>Retiree, Inc.</b>) explore strategies for optimizing Medicare premiums and taxes. Medicare premiums are based on one’s income from two years earlier, and they rise sharply at certain income thresholds. Meanwhile, taxes on Social Security benefits cause marginal tax rates for middle-income retirees also to rise sharply on a wide range of income, and then drop sharply at still higher incomes. This humplike rise and fall in rates is called the <i>tax torpedo</i>. Reichenstein and Meyer argue that some retirees should convert assets in their tax-deferred accounts (TDAs) into Roth IRAs if their income is at or beyond the end of the tax torpedo, thus allowing them to achieve a lower tax rate on the converted assets. However, those who will be on Medicare two years hence may need to limit their Roth conversions to avoid increasing their future Medicare premiums.

Practical Applications of Fundamental Factors That Improve Your Investments:A Practical Guide

Practical Applications Summary In Fundamental Factors That Improve Your Investments: A Practical Guide, from the October 2019 issue of The Journal of Investing, authors Pim Lausberg (of APG Asset Management), Alfred Slager (of TIAS School for Business and Society), and Philip Stork (of VU University Amsterdam) explore the influence of fundamental factors—rather than style factors—on portfolio returns. The authors present an intuitive framework for measuring and steering fundamental factors in a portfolio and provide examples showing how to identify factor concentration risks and tilt portfolios to desired exposures. They also offer suggestions on how investors can embed the factor-based approach in their existing investment process. TOPICS:Analysis of individual factors/risk premia, portfolio construction, performance measurement

Practical Applications of An Integrated Approach to Quantitative ESG Investing

<h3>Practical Applications Summary</h3> In <b><i>An Integrated Approach to Quantitative ESG Investing</i></b>, from the February 2020 issue of <b><i>The Journal of Portfolio Management</i></b>, authors <b>Mike Chen</b> and <b>George Mussalli</b> (both of <b>PanAgora Asset Management</b>) propose a novel quantitative framework for optimizing both alpha and the environmental, social, and corporate governance (ESG) aspects of a portfolio. Although investors, especially those in the millennial generation, have become increasingly interested in the ESG aspects of the companies within their portfolios, there has not yet been a well-defined process for constructing portfolios that factors ESG principles into a strictly return-oriented model. Chen and Mussalli’s approach is based on three pillars: ESG factors that may also be alpha factors, a unique materiality value that links ESG considerations to alpha, and a portfolio construction framework that is informed by an investor’s ESG preferences. The key strengths of this integrated ESG modeling framework are its flexibility, relevancy, and dynamic nature. <b>TOPICS:</b>Portfolio theory, portfolio construction, ESG investing

Practical Applications of The Value of Allocating to Annuities

<h3>Practical Applications Summary</h3> In <b><i>The Value of Allocating to Annuities</i></b>, from the Summer 2020 issue of <b><i>The Journal of Retirement</i></b>, author <b>David Blanchett of Morningstar Investment Management</b> explores the costs and benefits of including annuities in the mix of products financial advisors recommend to clients. Annuities have long been unpopular among investors and advisors, who perceive them as complex, expensive, and inflexible. But annuities provide one benefit other products cannot: guaranteed lifetime income. Blanchett says it is unwise to ignore this benefit, and investors and advisors should consider the relative cost of an annuity-inclusive vs. an investment-only strategy. Blanchett demonstrates that if advisors construct product mixes with moderate fees across annuities and investments, allocating an average of 30% to annuities generates an average alpha-equivalent benefit (that is, an additional return) of 0.73% relative to investment-only portfolios. Therefore, Blanchett says, advisors should educate themselves about annuities, to better identify the right annuity products and the clients for whom they make sense. <b>TOPICS:</b>Wealth management, retirement

Practical Applications of Analyzing the Evidence:Are Multiclass Mutual Funds the Right Choice?

<h3>Practical Applications Summary</h3> In <b>Analyzing the Evidence: <i>Are Multiclass Mutual Funds the Right Choice?</i></b> in the Spring 2020 edition of <i>The Journal of Index Investing</i>, <b>Jonathan Handy</b> of <b>Western Kentucky University</b>, <b>Jonathan Ricketts</b> of <b>Furman University</b>, and <b>Thomas Smythe</b> of <b>Florida Gulf Coast University</b> review the empirical and academic literature on multiclass mutual funds and draw conclusions about the suitability of such funds for investors. The authors trace the history of these investment products and examine the considerable body of evidence that multiclass funds have governance issues and incur substantial, if not excessive, expenses. Although the multiclass framework may broaden investor options, it also inherently leads to agency problems. Fund advisors often face conflicts of interest between themselves and their clients. They may be motivated to recommend a class of mutual fund shares that is inappropriate for a client but may be the most profitable for the advisor to sell. Moreover, investors are confused by the categorization schemes of multiclass funds and their associated fees. Advisors and fund managers themselves are often not fully conversant with the characteristics of the multiclass funds they are touting. The systemic weaknesses of the multiclass-fund framework should prompt reconsideration or even eschewal of these products by investors and advisors alike. <b>TOPICS:</b>Financial crises and financial market history, mutual fund performance

Practical Applications of CLOs, Private Equity, Pensions, and Systemic Risk

<h3>Practical Applications Summary</h3> In <b><i>CLOs, Private Equity, Pensions, and Systemic Risk</i></b>, from the Spring 2020 issue of <i>The Journal of Structured Finance</i>, <b>Rod Dubitsky</b>, founder of the <b>People’s Economist</b>, examines rating agency models for analyzing collateralized loan obligations (CLOs) and concludes that they are deeply flawed in that they rely on historical data that does not describe the current situation and on assumptions about correlation (diversification) that do not hold true in practice. Dubitsky presents evidence that default likelihoods are higher and expected recoveries are lower than the rating agencies assume in their models. He also highlights problematic practices in the CLO market, including weakened bond covenants and other terms, conflicts of interest in the management of CLO underlying portfolios, and a rising concentration of underlying leveraged loans in the lowest rating categories. Additionally, Dubitsky examines the relationships among 1) CLOs, 2) private equity–sponsored companies that borrow via leveraged loans that are then packaged into CLOs, and 3) pension plans that invest in private equity (PE) funds and CLOs. He argues that a contraction of available CLO-funded credit to leveraged-loan borrowers could cause many to fail, resulting in both increased unemployment and losses to PE funds and their pension plan investors. He concludes that the potential contraction of CLO funding for leveraged loans creates significant systemic risk. <b>TOPICS:</b>CLOs, CDOs, and other structured credit; financial crises and financial market history

Practical Applications of The Pragmatics of Private Markets Investing

<h3>Practical Applications Summary</h3> In <b><i>The Pragmatics of Private Markets Investing</i></b> from the 2020 Fund Manager Selection special issue of <i>The Journal of Portfolio Management</i>, <b>Karl Polen</b>, chief investment officer of the <b>Arizona State Retirement System</b>, provides insights on private market investing from the vantage of nearly 40 years in the industry. Polen approaches private market investing from the perspective of investing in a business, and therefore he puts the emphasis on the private equity firm’s business strategy, company culture, and employees. Ultimately, private equity firms must also have fee structures that align with investor interests. <b>TOPIC:</b>Manager selection

Practical Applications of Do as I Say, Not as I Do:An Analysis of Portfolio Development Recommendations Made by Financial Advisors

Practical Applications Summary In Do as I Say, Not as I Do: An Analysis of Portfolio Development Recommendations Made by Financial Advisors, from the Spring 2020 issue of The Journal of Wealth Management, authors John Grable (of the University of Georgia), Amy Hubble (of Radix Financial), and Michelle Kruger (of Loras College) explore the variation of financial advisors’ asset allocations, from general best practices to hypothetical scenarios. While they find advisors’ general allocation strategies align with their scenario-specific allocations in most regards, they also discover that, in practice, advisors tend to subconsciously overweight their clients’ age and employment status. This overweighting leads to suboptimal allocation portfolios with lower risk and a higher ratio of bonds to equities. TOPICS:Portfolio construction, risk management, wealth management

Practical Applications of The Use and Value of Financial Advice for Retirement Planning

Practical Applications Summary In The Use and Value of Financial Advice for Retirement Planning, from the Winter 2020 issue of The Journal of Retirement, W. Van Harlow, formerly of Empower Retirement; Keith Brown of the University of Texas; and Stephen Jenks of Empower Retirement examined the characteristics of individuals who received professional advice for retirement planning and the economic value of the results. The authors surveyed more than 4,000 working households to assess their demographics as well as their investment and behavioral characteristics. The results reveal that the retirement income replacement earned by advised households tends to be 15 percentage points higher than that of unadvised households. TOPICS:Retirement, quantitative methods, portfolio construction

Practical Applications of And the Winner Is …A Comparison of Valuation Measures for Equity Country Allocation

Practical Applications Summary In And the Winner Is … A Comparison of Valuation Measures for Equity Country Allocation, from the July 2019 edition of The Journal of Portfolio Management, Adam Zaremba of the University of Dubai and Jan Szczygielski of the Newcastle Business School at Northumbria University examine the performance of 14 valuation ratios to see which are best for country-level equity allocation. They assess seven performance metrics and calculate ratios of each against both enterprise value (EV) and market equity (ME). For individual stocks, the ratio of earnings before interest, tax, depreciation, and amortization (EBITDA) to EV is consistently TOPICS:Accounting and ratio analysis, mutual funds/passive investing/indexing, emerging

Practical Applications of Rebalance Timing Luck:The Difference Between Hired and Fired

<h3>Practical Applications Summary</h3> In <b>Rebalance Timing Luck: <i>The Difference Between Hired and Fired</i></b> from the Summer 2019 issue of <b><i>The Journal of Index Investing</i></b>, authors <b>Corey Hoffstein, Daniel “Justin” Sibears</b>, and <b>Nathan Faber</b> (all of <b>Newfound Research</b> in Boston) warn that index fund managers may be overlooking a significant factor driving their investment performance: the date when they rebalance their portfolios. Rebalancing is essential to sound portfolio management, but most managers give little thought to when to do it. Hoffstein, Sibears, and Faber say that is a mistake. They introduce the concept of rebalance timing luck, showing that portfolios rebalanced in different months perform differently over time. This can mean major long-term earnings shortfalls for managers with bad rebalance timing luck. To solve this problem, the authors suggest dividing index funds into identically managed subportfolios, rebalancing the subportfolios on different dates equally spread out over the year, and then equally redistributing all of the fund’s assets across the subportfolios. They find that fund managers can substantially decrease the effects of rebalance timing luck just by dividing a fund into four subportfolios and rebalancing one per quarter—a simple way to potentially shield themselves and investors from bad rebalance timing luck. <b>TOPICS:</b>Mutual funds/passive investing/indexing, portfolio construction, performance measurement, statistical methods

Practical Applications of When Growth Beats Value:Applying Momentum Filters to Growth and Value Portfolios

<h3>Practical Applications Summary</h3> In <b>When Growth Beats Value: <i>Applying Momentum Filters to Growth and Value Portfolios</i></b>, in the August 2019 edition of <b><i>The Journal of Investing</i>, Andrew Clare, James Seaton,</b> and <b>Stephen Thomas</b>, all of <b>ass Business School, City University</b>, and <b>Peter N. Smith</b> of the <b>University of York</b> analyze momentum investing and whether simple adaptations of momentum factors can augment the performance of growth and value portfolios. They compare the returns from applying momentum-based trading rules to developed and emerging markets and to growth- and value-oriented investing. The crux of their article is a distinction between <i>relative momentum</i>, which ranks assets based on their performance against one another, and <i>absolute momentum</i>, which ranks assets based on whether they have displayed recent positive returns. The authors find that the performance gap between buying and holding a value portfolio over a growth portfolio shrinks after the application of a relative-momentum filter. They note that growth investing can generally outperform comparable value and conventional buy-and-hold strategies when investors use momentum-based rules, though value strategies can benefit as well. Trend following in particular offers significant benefits over a buy-and-hold strategy. The authors additionally find that absolute-momentum overlays deliver better returns overall than relative-momentum ones (except in the case of developed-market growth stocks), along with lower volatility and smaller drawdowns. <b>TOPICS:</b>Factor-based models, performance measurement, emerging