Goals-based investing (GBI) increasingly is replacing traditional portfolio approaches as investors realize the failing of modern portfolio theory (MPT). But the techniques being suggested for GBI still are rooted in complex, risky, error-prone mathematical models based on MPT, well beyond the...

Since the development of modern portfolio theory (MPT) in the late 1950s and early 1960s, academics have offered numerous competing theories. MPT's simplicity is appealing: The expected return on an asset is simply a function of the return of the market portfolio and the asset's beta to the...

The Capital Asset Pricing Model (CAPM) has been the backbone of asset market finance even though many academic studies have revealed its limitations, both theoretical and empirical. This paper argues that including liability or benchmark considerations in investment decisions may provide a...

Kahneman-Tversky's (KT) seminal paper on Prospect Theory (PT) found that individuals placed value on changes in wealth. Individuals appeared to display different reactions to gains and losses and, displayed loss aversion, which depended on the distance from a “critical value”. These two...

There are two approaches to solving investment management challenges. The first (or traditional/mainstream) approach takes existing assets and tries to develop a robust analytic approach based on current theory to develop an appropriate investment solution. Life-cycle investing for retirement is...

The current trend towards Defined Contribution (DC) retirement systems around the world has rendered the risk management of pension funds crucial for the financial health of millions of people. Severe market downturns have put in evidence the need for more effective practices to control losses...

There has been a rapid growth in retail investing with assets increasingly going into robo-advisors and target date funds. One of the appealing aspects of these platforms and products is that they delegate all investment decisions to the asset manager (who is believed to be more sophisticated)...

The move to defined contribution plans has transferred risk to individuals who are least capable of bearing such risk and requires them to make complex decisions for which they are not prepared. Accumulation (investments) and decumulation (annuity purchase) decisions are complex, costly, often...

English Abstract: A commonly-accepted retirement goal for a healthy pension is for it to sustain the relatively higher standard-of-living of the latter part of one’s working life throughout retirement. A recent innovation implemented by Brazil in January 2023 might provide a solution to the...