The Journal of Wealth Management 

About: The Journal of Wealth Management is an academic journal. The journal publishes majorly in the area(s): Portfolio & Asset allocation. It has an ISSN identifier of 1520-4154. Over the lifetime, 802 publications have been published receiving 5170 citations. The journal is also known as: Journal of Wealth Management.

Investor Sentiment and Stock Returns

Abstract: The author investigates the predictive power of investment newsletters and concludes that writers of investment newsletters do not seem to have any statistically significant ability, as a group, to forecast stock returns. Using statistical tools, the article shows that there is no discernable relationship between the forecasts made by newsletter writers as a group and stock market returns over four, twenty-six, or even fifty-two weeks. Statman then considers the questions of what makes forecasters turn bullish or bearish. He finds that they typically tend to “follow the tape” in the short term, but concludes that strong medium – to longer-term returns will lead forecasters both to become more bullish and to start anticipating some correction. Statman finally looks into the impact of more volatility on the propensity of forecasters to become more or less bullish, and concludes that high volatility does scare newsletter writers into bearishness.

Risk-Adjusted Performance of Funds of Hedge Funds Using a Modified Sharpe Ratio

Abstract: Many institutional investors use the traditional Sharpe ratio today to examine the risk-adjusted performance of funds of hedge funds (FOFs). However, this could pose problems due to the non-normal returns of this alternative asset class. A modified value at risk (VaR) and modified Sharpe ratio solves the problem and can provide a superior tool for correctly measuring risk-adjusted performance. In this article, the authors rank 30 funds of hedge funds according to the Sharpe and modified Sharpe ratio. Their results indicate that the modified Sharpe is lower and more accurate when examining non-normal returns.

A New Paradigm for Practical Application of Behavioral Finance: Creating Investment Programs Based on Personality Type and Gender to Produce Better Investment Outcomes

Abstract: The authors believe that the next phase in the practical application of behavioral finance is to correlate established investor biases with the psychographic and gender profiles of specific investors. They ask, “Are certain personality types or genders susceptible to biases identified in the behavioral finance literature? If so, can this information be helpful to investors and advisors?” Their study examines the responses of 100 investors given a detailed Myers-Briggs Type Indicator® personality test and a questionnaire designed to reveal investor biases. They find that personality types and genders are differentially susceptible to numerous investor biases; accordingly, they introduce a new paradigm of practical application of behavioral finance that leverages their findings.

Goals-Based Investing: Integrating Traditional and Behavioral Finance

Abstract: This article examines opportunities to improve wealth management by combining traditional finance theory with the observations of behavioral finance. Areas of focus include risk measurement, risk profiling, and methods for managing behavioral biases. In the area of risk measurement, the author stresses the importance of capturing investor preferences and goals and proposes several measures that are consistent with this objective. The author also critiques common risk profiling techniques, advocating separate risk tolerance estimates for separate goals rather than an overall risk tolerance for each investor, noting that the total portfolio framework of traditional finance is inconsistent with investors9 tendencies towards mental accounting. A better result may be achieved by linking individual strategies to a specific goal or goals. The author describes a process for implementing his recommendations through examples, considering the challenges of investing to meet current lifestyle expenses and investing for a fixed planning horizon. The article closes with a call to align investment strategy development with common investor goals, arguing that this will promote consistency between the investment principles of the practitioner and the perspective of the individual investor.

10 Things That Investors Should Know About Hedge Funds

Abstract: In this article, the author reviews some of the most important findings in hedge fund research so far. We show that proper hedge fund investing requires a much more elaborate approach to investment decision-making than currently in use by most investors. The available data on hedge funds should be corrected for various types of errors, survivorship bias, and autocorrelation. In addition, tools like mean-variance analysis and the Sharpe ratio are no longer appropriate when hedge funds are involved. Including hedge funds in a traditional investment portfolio can significantly improve that portfolio9s mean-variance characteristics, but it can also be expected to lead to significantly lower skewness as well as higher kurtosis. This means that the case for hedge funds is a lot less straightforward than often suggested and requires investors to make a definite trade-off between profit and loss potential.