Showing papers on "Investment management published in 1969"

A behavioral approach to the investment‐management decision and to the securities markets*

Abstract: THIS DISSERTATION EXAMINES the individual financial-investment decision. This investment decision can be thought of as merely a particular class of decision under conditions of risk and ambiguity. Decisions of this kind have been the academic domain of psychologists, economists, mathematicians, and others as well. Each of these fields has been concerned with the developing a formal theory of decisionmaking under conditions of risk and with attempts at empirical verification and observation of relevant variables. This study uses the Markowitz/Sharpe linear portfolio model to describe and evaluate the salient aspects of the individual investment decision. In particular, it explores relationships that exist between amateur investors and noninvestors and examines individual risk preferences and their importance in determining and explaining investment management and performance. In a carefully designed experiment, over 125 subjects (amateur investors and noninvestors) were examined with respect to their portfolio choice in two investment periods. In addition, the subjects submitted to a variety of tests designed to examine their personality processes, cognitive-judgmental processes, and risk preferences. Portfolio choice is described in terms of:

The Regulation of Nonbank Financial Intermediaries

Abstract: IN THE EARLY STAGES of our economic growth, the commercial banks and life insurance companies were the predominant forms of financial intermediation. They attracted the bulk of the nation's institutionalized savings, dispensed a fairly homogeneous product and were amenable to a simplistic form of regulation. In the post-war period, however, the less regulated and more aggressive intermediaries uch as trust and loan companies in Canada, savings and loan associations in the United States, finance companies, mutual funds and pension funds attracted a progressively larger percentage of the nation's savings. They achieved this growth by offering the public a wide variety of new financial claims and services which more adequately reflected the needs of a complex economy. This shift of economic influence, shown in Tables 1 and 2, began to attract government attention on a noticeable scale in the early 1960's largely through the work of the Commission on Money and Credit and the Royal Commission on Banking and Finance. Their investigations plus subsequent events in the capital market, especially in Canada, indicated the need for a new and comprehensive approach to the regulation of nonbanking financial institutions. In the realm of monetary policy, the development of near-money substitutes is believed by some commentators to have weakened the ability of the central bank to control the economy by its present methods.1 In the broader area of economic stability and growth, the increasing importance of these institutions to the financing of the private sector and their dominance of the capital markets through the institutionalization of savings have raised new problems in such fields as direct control of lending, security regulation, freedom of entry, the value of increased competitiveness, solvency and financial disclosure. The regulation of nonbank financial intermediaries in Canada has been viewed mainly as a legislative problem and, because of this legalistic bias, emphasis has been placed on portfolio controls, capital/liability ratios and chartering requirements. These measures no doubt added to the solvency of the system but they also generated a conservative proclivity and monopoly profits. These features of our financial system were criticized by the Royal Commission on Banking and Finance with the result that, for the first time in Canada, measures have been taken to develop greater competition in our capital markets and among our financial intermediaries. The concept of selective credit controls is presently in abeyance because of the new emphasis on encouraging the flow of funds by competitive market forces. However, the federal government has been forced to recognize that nonbank financial intermediaries, if left to their own devices can create serious disturbances in the capital markets. Provincial governments, who have the legislative power to control some of these institutions, have also been prodded into action after years of lethargy as a result of recent revelations of fraud, mismanagement and excessive assumption of risk by companies within their jurisdiction. Consequently, federal ALIX GRANGER is a lecturer in Investment Management at Simon Fraser University, a member of the Vancouver Society of Financial Analysts, and was formerly an investment analyst with A. E. Ames and Co., Toronto. Mrs. Granger received a B.A. in Political Science and Economics from the University of Toronto and an M.A. in Economics from Simon Fraser University. 1. Footnotes appear at end of article.