A worker can reduce tax liability by contributing to a private pension plan when marginal tax rates are high and withdraw pension benefits when marginal tax rates are low. We quantify the tax benefit of income smoothing through the private retirement system and find that it is negligible. This...

This article studies the portfolio problem with realization-based capital gain taxation when limited amounts of losses qualify for tax rebate payments, as is the case under current US tax law. When the tax rate applicable to realized losses exceeds that on realized capital gains, it can be...

The estimation of the inverse covariance matrix plays a crucial role in optimal portfolio choice. We propose a new estimation framework that focuses on enhancing portfolio performance. The framework applies the statistical methodology of shrinkage directly to the inverse covariance matrix using...

We propose a performance measure that generalizes the Sharpe ratio. The new performance measure is monotone with respect to stochastic dominance and consistently accounts for mean, variance and higher moments of the return distribution. It is equivalent to the Sharpe ratio if returns are...

Pension fund returns can be decomposed into different sources, including market movements, asset allocation policy, and active portfolio management. We use a unique database covering the asset allocations of US defined-benefit pension funds for the period 1990–2008, and we test the role of...

This paper investigates the downside risk exposure of international stock returns in 14 major industrialized economies around the world. For the period 1975–2010, we find that differences in returns on value and growth portfolios can be rationalized by assets’ reagibilities to market’s...

This paper investigates the diversification contribution of several commodities to a portfolio of traditional assets from the perspective of a euro investor. The approach applied in our analysis has high informational content as it differentiates between the sources of the diversification...

Asset managers are often given the task of restricting their activity by keeping both the value at risk (VaR) and the tracking error volatility (TEV) under control. However, these constraints may be impossible to satisfy simultaneously because VaR is independent of the benchmark portfolio. The...

We analyze the impacts of an additional rider incorporated in recent retirement products. The payoff is linked to the performance of a multi asset investment strategy and includes a minimum interest rate guarantee. In addition, the buyer receives the option to decide on the investments...