ASSET ALLOCATION AND INDUSTRY MOMENTUM STRATEGY FOR RETIREMENT PLANNING
Keywords:
Retirement Planning, Asset Allocation, Industry Momentum StrategyAbstract
The purposes of this paper are to compare the performance of asset allocation strategies and to examine an industry momentum strategy for enhancing the returns of retirement planning based on 20 and 30 years of investment period and target return to investment ratioof 2 times to 5 times for 15 years after retirement by investing in bond and equity. The results indicate that the suitableinvestment strategy depends on a length of investment period and a target rate of return. The investors who have a longer investment period have more opportunity to archive the target. The investors with less of target rate of return should have a high weights assigned to bonds. The investors who have a higher target rate of return should invest in a largerproportion of equitiesto achieve the target. Moreover, the results show thatindustry momentum strategy provides a higher returnand reduces risk for retirement planning.
References
ฉัตรชัย สิริเทวัญกุล. (2555). การจัดสรรสินทรัพย์ลงทุนที่เหมาะสมกับวัยเกษียณ, เอกสารงานวิจัยฉบับที่ 5/2556.กรุงเทพฯ: Capital Market Research Institute, The Stock Exchange of Thailand.
สมาคมนักวางแผนการเงินไทย. (2557). การวางแผนการเงินในศตวรรษที่ 21. สืบค้น 24 ธันวาคม 2557, จาก http://tfpa.or.th/2014/magazine.php?subtype=Bulletin
สำนักงานสถิติแห่งชาติ. (2557). สรุปผลที่สำคัญ การทำงานของผู้สูงอายุในประเทศไทย พ.ศ. 2557. สืบค้น 14 ธันวาคม 2558, จาก http://service.nso.go.th/nso/web/survey/surpop2-1-1.html
ธนาคารแห่งประเทศไทย. (2556). รายงานผลการสำรวจทักษะทางการเงินของไทยปี 2556. สืบค้น 14 ธันวาคม 2558, จาก https://www.1213.or.th/th/aboutfcc/knownfcc/Documents/2013%20ThaiFLSurvey.pdf
Basu, A. K., Byrne, A., & Drew, M. E. (2011). Dynamic Lifecycle Strategies for Target Date Retirement Funds. Journal of Portfolio Management, 37(2), 83-96.
Basu, A. K., & Drew, M. E. (2009). Portfolio Size Effect in Retirement Accounts: What Does It Imply for Lifecycle Asset Allocation Funds? Journal of Portfolio Management, 35(3), 61-72.
Behr, P., Guettler, A., & Truebenbach, F. (2012). Using industry momentum to improve portfolio performance. Journal of Banking & Finance, 36(5), 1414-1423.
Bianchi, D., & Guidolin, M. (2014). Can long-run dynamic optimal strategies outperform fixed-mix portfolios? Evidence from multiple data sets. European Journal of Operational Research, 236(1), 160-176.
Bikker, J. A., Broeders, D. W. G. A., Hollanders, D. A., & Ponds, E. H. M. (2012). Pension Funds’ Asset Allocation and Participant Age: A Test of the Life-Cycle Model. Journal of Risk and Insurance, 79(3), 595-618.
Bridges, B., Gesumaria, R., & Leonesio, M. V. (2010). Assessing the performance of life-cycle portfolio allocation strategies for retirement saving: a simulation study. Soc Secur Bull, 70(1), 23-43.
Brinson, G. P., Hood, L. R., & Beebower, G. L. (1995). Determinants of Portfolio Performance. Financial Analysts Journal, 51(1), 133-138.
Butler, K. C., & Domian, D. L. (1992–1993). Long-run returns on stock and bond portfolios: Implications for retirement planning. Financial Services Review, 2(1), 41-49.
Chai, J., Horneff, W., Maurer, R., & Mitchell, O. S. (2011). Optimal Portfolio Choice over the Life Cycle with Flexible Work, Endogenous Retirement, and Lifetime Payouts. Review of Finance, 15(4), 875-907.
Chen, H., & Estes, J. (2007). Value Averaging for 401(k) Plans Hakes More ‘Cents’ than Dollar-Cost Averaging. Journal of Financial Planning, 20(2), 56-59.
Chen, H., & Estes, J. (2010). A Monte Carlo study of the strategies for 401(k) plans: dollar-costaveraging, value-averaging, and proportional rebalancing. Financial Services Review, 19(2), 95-109.
Collins, P., & Lam, H. D. (2011). Asset allocation, human capital, and the demand to hold life insurance in retirement. Financial Services Review, 20(4), 303-325.
DeMiguel, V., Garlappi, L., & Uppal, R. (2009). Optimal versus Naïve Diversification: How Inefficient Is the 1/N Portfolio Strategy? The Review of Financial Studies, 22(5), 1915-1953.
Dierkes, M., Erner, C., & Zeisberger, S. (2010). Investment horizon and the attractiveness of investment strategies: A behavioral approach. Journal of Banking & Finance, 34(5), 1032-1046.
Domian, D. L., Louton, D. A., & Racine, M. D. (2003). Portfolio diversification for long holding periods: How many stocks do investors need? Studies in Economics and Finance, 21(2), 40.
Dubil, R. (2005). Lifetime Dollar-Cost Averaging: Forget Cost Savings, Think Risk Reduction. Journal of Financial Planning, 18(10), 86-90.
Duchin, R., & Levy, H. (2009). Markowitz Versus the Talmudic Portfolio Diversification Strategies. Journal of Portfolio Management, 35(2), 71-74.
Elias, S. M., Azmi, N. N. H. N., & Kamil, K. H. (2014). Industry Momentum Strategy in Malaysian Stock Market. International Journal of Business and Social Science, 5(11), 194-202.
Ervin, D. M., Faulk, G. K., & Smolira, J. C. (2009). The Impact of Asset Allocation, Savings and Retirement Horizons, Savings Rates, and Social Security Income in Retirement Planning: A Monte Carlo Analysis. Financial Services Review, 18(4), 313-331.
Fong, W. M., & Yong, L. H. M. (2005). Chasing trends: recursive moving average trading rules and internet stocks. Journal of Empirical Finance, 12(1), 43-76.
Gibson, R. (2013). Asset Allocation: Balancing Financial Risk (5th ed.). New York: McGraw-Hill.
Hubener, A., Maurer, R., & Rogalla, R. (2013). Optimal Portfolio Choice with Annuities and Life Insurance for Retired Couples. Review of Finance, 18(1), 147-188.
Jacobs, H., Muller, S., & Weber, M. (2014). How should individual investors diversify? An empirical evaluation of alternative asset allocation policies. Journal of Financial Markets, 19(6), 62-85.
Jegadeesh, N., & Titman, S. (1993). Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency. The Journal of Finance, 48(1), 65-91.
Jegadeesh, N., & Titman, S. (2001). Profitability of Momentum Strategies: An Evaluation of Alternative Explanations. The Journal of Finance, 56(2), 699-720.
Jegadeesh, N., & Titman, S. (2011). Momentum. Annual Review of Financial Economics, 3(1), 493-509.
Liu, Q., Chang, R. P., Jong, J. C. d., & Robinson, J. H. (2011). Are lifecycle funds getting a bum rap? : a comprehensive comparison of lifecycle versus lifestyle retirement strategies from accumulation through withdrawal. The Journal of Wealth Management, 14(2), 68-84.
Maginn, J. L., Tuttle, D. L., McLeavey, D. W., & Pinto, J. E. (2007). Managing Investment Portfolios: A Dynamic Process (3rd ed.).New Jersey, Canada:John Wiley & Sons.
Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77-91.
Moskowitz, T. J., & Grinblatt, M. (1999). Do Industries Explain Momentum? The Journal of Finance, 54(4), 1249-1290.
Panyagometh, K. (2011). Asset Allocation, Time Diversification and Portfolio Optimization for Retirement. Technology and Investment, 2(2), 92-104.
Panyagometh, K. (2013). Performance Comparison between Dollar Cost Averaging and Value Averaging Investment Strategies and the Impacts of Investment Horizon and Target Terminal Wealth. Journal of Applied Finance & Banking, 3(3), 15-27.
Pfau, W. D. (2011). The Portfolio Size Effect and Lifecycle Asset Allocation Funds: A Different Perspective. Journal of Portfolio Management, 37(3), 44-53.
Pfau, W. D. (2012). Long-Term Investors and Valuation-Based Asset Allocation. Applied Financial Economics, 22(16-18), 1343-1353.
Read, D., & Loewenstein, G. (1995). Diversification Bias: Explaining the Discrepancy in Variety Seeking between Combined and Separated Choices. Journal of Experimeental Psychology: Applied, 1(1), 34-49.
Reddy, W., Higgins, D., Wist, M., & Garimort, J. (2013). Australian industry superannuation funds: Investment strategies and property allocation. Journal of Property Investment and Finance, 31(5), 462-480.
Schleef, H. J., & Eisinger, R. M. (2007). Hitting or missing the retirement target: comparing contribution and asset allocation schemes of simulated portfolios. Financial Services Review, 16(3), 229-243.
Shiller, R. (2005). The Lifecycle Personal Accounts Proposal for Social Security: An Evaluation, Working Paper No. 11300. Cambridge, MA: National Bureau of Economic Research.
Shynkevich, A. (2013). Time-series momentum as an intra- and inter-industry effect: Implications for market efficiency. Journal of Economics and Business, 69, 64-85.
Simonson, I. (1990). The Effect of Purchase Quantity and Timing on Variety-Seeking Behavior. Journal of Marketing Research, 27(2), 150-162.
Spitzer, J. J. (2008). Retirement withdrawals: an analysis of the benefits of periodic “midcourse” adjustments. Financial Services Review, 17(1), 17-29.
Spitzer, J. J., Strieter, J. C., & Singh, S. (2007). Guidelines for Withdrawal Rates and Portfolio Safety During Retirement. Journal of Financial Planning, 20(10), 52-59.
Stendardi, E. J., Graham, J. F., & O’Reilly, M. (2006). The impact of gender on the personal financial planning process: Should financial advisors tailor their process to the gender of the client? Humanomics, 22(4), 223-238.
Stout, R. G. (2008). Stochastic Optimization of Retirement Portfolio Asset Allocations and Withdrawals. Financial Services Review, 17(1), 1-15.
Su, D. (2011). An empirical analysis of industry momentum in chinese stock markets. Emerging Markets, Finance and Trade, 47(4), 4.
Tu, J., & Zhou, G. (2011). Markowitz meets Talmud: A combination of sophisticated and naïve diversification strategies. Journal of Financial Economics, 99(1), 204-215.
Van Dijk, R., & Keijzer, T. (2004). Region, sector and style selection in global equity markets. Journal of Asset Management, 4(5), 293-307.
Vardharaj, R., & Fabozzi, F. J. (2007). Sector, Style, Region: Explaining Stock Allocation Performance. Financial Analysts Journal, 63(3), 59-70.
Veld-Merkoulova, Y. V. (2011). Investment horizon and portfolio choice of private investors. International Review of Financial Analysis, 20(2), 68-75.
Downloads
Published
How to Cite
Issue
Section
License
Content and information of the article published at Suthiparithat Journal are based on the sole opinions and responsibility of author(s) only. Neither the editorial board involve in......
