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Essays on optimal portfolio decisions for long-term investors
Descriptive
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Text
TitleInfo
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Title
Essays on optimal portfolio decisions for long-term investors
Identifier
ETD_2892
Identifier
(type = hdl)
http://hdl.rutgers.edu/1782.1/rucore10002600001.ETD.000056116
Language
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(authority = ISO639-2);
(type = code)
eng
Genre
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theses
Subject
(ID = SBJ-1);
(authority = RUETD)
Topic
Management
Subject
(ID = SBJ-2);
(authority = ETD-LCSH)
Topic
Capitalists and financiers
Subject
(ID = SBJ-3);
(authority = ETD-LCSH)
Topic
Asset allocation
Subject
(ID = SBJ-4);
(authority = ETD-LCSH)
Topic
Portfolio management
Subject
(ID = SBJ-5);
(authority = ETD-LCSH)
Topic
Stocks--Rate of return
Subject
(ID = SBJ-6);
(authority = ETD-LCSH)
Topic
Risk-return relationships
Abstract
(type = abstract)
This dissertation contains two essays on the optimal portfolio decision for long-term investors. The first essay studies the optimal asset allocation for long-horizon investors with non-tradable labor income when multiple risky asset returns are predictable. It finds that more risk-averse investors hold a higher bond/stock ratio in their risky portfolios when labor income is positively correlated with stock return or independent of risky asset returns, but the reverse is true when labor income is positively correlated with bond return. The allocation to stock inherits the inverted U-shaped pattern of labor income growth with respect to expected time until retirement. These results suggest that popular recommendations of investment advisors that more conservative investors should hold a higher bond/stock ratio and that the portfolio allocation to stock should equal 100 minus age may both lack theoretical justification. In the out-of-sample performance test, the dynamic portfolio shows the highest mean returns and Sharpe ratio than two benchmark portfolios, justifying the economic significance of incorporating the time-variation of investment opportunities and nontradable labor income into investors’ portfolio choice. The second essay studies employees’ optimal portfolio in their defined contribution pension plans. Assuming a discrete time model with predictable risky asset returns, the essay finds that the employees’ optimal portfolio decision can be greatly affected by the employees’ time to retirement, risk preference, contribution rate as well as the correlation between labor income and asset returns. Performance test shows that the gains from adopting the dynamic portfolio strategy relative to several benchmark strategies, including the 1/n rule, the optimal static strategy with and without the consideration of asset return predictability, all stock strategy, and all company stock strategy, are economically significant and the economic gain increases with employees' risk aversion. The empirical evidence that employees invest significantly in their company stock in pension plans is difficult to be justified, even after the consideration of short-sale constraints, higher expected company stock return, employees’ familiarity with their company, and employers’ exclusive match policy. Over allocation to company stock can be very costly, especially to conservative employees.
PhysicalDescription
Form
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electronic resource
Extent
ix, 116 p. : ill.
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application/pdf
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text/xml
Note
(type = degree)
Ph.D.
Note
(type = bibliography)
Includes bibliographical references
Note
(type = vita)
Includes vita
Note
(type = statement of responsibility)
by Hui-Ju Tsai
Name
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(type = personal)
NamePart
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Tsai
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(type = given)
Hui-Ju
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1977-
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author
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Hui-Ju Tsai
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Wu
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Yangru
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chair
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Advisory Committee
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Yangru Wu
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NamePart
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Ronen
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Tavy
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internal member
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Advisory Committee
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Tavy Ronen
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(type = family)
Sopranzetti
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Ben
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internal member
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Advisory Committee
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Ben Sopranzetti
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Yao
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Rui
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outside member
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Advisory Committee
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Rui Yao
Name
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NamePart
Rutgers University
Role
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degree grantor
Name
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NamePart
Graduate School - Newark
Role
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school
OriginInfo
DateCreated
(qualifier = exact)
2010
DateOther
(qualifier = exact);
(type = degree)
2010-10
Place
PlaceTerm
(type = code)
xx
RelatedItem
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TitleInfo
Title
Rutgers University Electronic Theses and Dissertations
Identifier
(type = RULIB)
ETD
RelatedItem
(type = host)
TitleInfo
Title
Graduate School - Newark Electronic Theses and Dissertations
Identifier
(type = local)
rucore10002600001
Location
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NjNbRU
Identifier
(type = doi)
doi:10.7282/T3Q52PF6
Genre
(authority = ExL-Esploro)
ETD doctoral
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Rights
RightsDeclaration
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The author owns the copyright to this work.
Copyright
Status
Copyright protected
Availability
Status
Open
Reason
Permission or license
RightsHolder
(ID = PRH-1);
(type = personal)
Name
FamilyName
Tsai
GivenName
Hui-Ju
Role
Copyright Holder
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Type
Permission or license
DateTime
2010-09-22 18:16:19
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Name
Hui-Ju Tsai
Affiliation
Rutgers University. Graduate School - Newark
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Type
License
Name
Author Agreement License
Detail
I hereby grant to the Rutgers University Libraries and to my school the non-exclusive right to archive, reproduce and distribute my thesis or dissertation, in whole or in part, and/or my abstract, in whole or in part, in and from an electronic format, subject to the release date subsequently stipulated in this submittal form and approved by my school. I represent and stipulate that the thesis or dissertation and its abstract are my original work, that they do not infringe or violate any rights of others, and that I make these grants as the sole owner of the rights to my thesis or dissertation and its abstract. I represent that I have obtained written permissions, when necessary, from the owner(s) of each third party copyrighted matter to be included in my thesis or dissertation and will supply copies of such upon request by my school. I acknowledge that RU ETD and my school will not distribute my thesis or dissertation or its abstract if, in their reasonable judgment, they believe all such rights have not been secured. I acknowledge that I retain ownership rights to the copyright of my work. I also retain the right to use all or part of this thesis or dissertation in future works, such as articles or books.
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Technical
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ETD
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application/pdf
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application/x-tar
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1290240
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