Full-text resources of CEJSH and other databases are now available in the new Library of Science.
Visit https://bibliotekanauki.pl

PL EN


2016 | 4/2016 (63), t.1 | 39 - 56

Article title

Proposal for a Practical Implementation of Maslowian Portfolio Theory

Content

Title variants

PL
Wniosek dotyczący praktycznego wdrożenia Maslowian Portfolio Theory

Languages of publication

PL EN

Abstracts

For many centuries, investing in financial markets was only for the very rich. However, since the Second World War it has become both possible and necessary for larger parts of the population to make investment decisions. “Possible,” because wealth became more equally distributed and “necessary,” because of the increase in life expectancy and the need to provide an (extra) income during retirement. In Europe it was MiFID I while in the United States it was FINRA Rule 2111 that gave direction to financial advisers. In their individual ways, both regulations state that they expect good care on the part of the advisor, but they do not specify what good investment advice looks like. Thus, investment advisers looked back to a sixty year old theory (Mean Variance Theory from H. Markovitz) that treated money as the only and ultimate life goal and proposed selection of a single investment portfolio based on efficiency in terms of “risk” (variance) and return for each investor. The postulated “optimal variance” was called the “risk profile.” The paper proposes that investments be used to attain real life goals. In doing so, it becomes obvious that investments should be molded around and created as a function of these goals. Therefore, it becomes natural to have multiple sub-portfolios, each with its own risk profile. With respect to the Maslowian Portfolio Theory, the author adds a framework that puts emphasis on needs and, in a natural way, applies a hierarchy to goals as well as making sure that no goals are missed. The aim of the paper is to propose a practical implementation of the Maslowian Portfolio Theory as well as to study its impact.

Year

Pages

39 - 56

Physical description

Dates

published
2016-11-30

Contributors

  • University of Warsaw
  • Vlerick Business School

References

  • Amenc, N., Martellini, L., Milhau, V., and Ziemann, V. (2009). Asset-Liability Management in Private Wealth Management. The Journal of Portfolio Management, 36(1), 100–120.
  • Barber, B.M. and Odean, T. (2001). Boys Will Be Boys: Gender, Confidence, and Common Stock Investment. Quarterly Journal of Economics, 116(1), 261–292.
  • Benartzi, S. and Thaler, R.H. (1995). Myopic Loss Aversion and the Equity Premium Puzzle. The Quarterly Journal of Economics, 110(1), 73–92.
  • Bernoulli, D. (1738). Specimen theoriae novae de mensura sortis. Comentarii Academiae Scientiarum Imperialis Petropolitanae, Tomus V, 175–192.
  • Brennan, M.J. and Xia, Y. (2002). Dynamic Asset Allocation under Inflation. The Journal of Finance, 57(3), 1201–1238.
  • Canner, N., Mankiw, G., and Weil, D. (1997). An Asset Allocation Puzzle. American Economic Review, 87(1), 181–191.
  • De Brouwer, P.J.S. (February 2009). Maslowian Portfolio Theory: An Alternative Formulation of the Behavioural Portfolio Theory. Journal of Asset Management, 9(6), 359–365.
  • De Brouwer, P.J.S. (2011). Target-Oriented Investment Advice. Journal of Asset Management, 13(2), 102–114.
  • De Brouwer, P.J.S. (2012). Maslowian Portfolio Theory: A Coherent Approach to Strategic Asset Allocation. Brussels: VUBPress.
  • Fama, E.F. (1965). The Behavior of Stock Market Prices. Journal of Business, 38(1), 34–105.
  • Friedman, M. (1953). The Case for Flexible Exchange Rates. In: Essays in Positive Economics (157–203). Chicago: University of Chicago Press.
  • Kahneman, D. (2011). Thinking, Fast and Slow. Macmillan.
  • Kenrick, D.T., Griskevicius, V., Neuberg, S.L., and Schaller, M. (2010). Renovating the Pyramid of Needs: Contemporary Extensions Built upon Ancient Foundations. Perspectives on Psychological Science, 5(3), 292–314.
  • Marinelli, N. and Mazzoli, C. (2010). An Insight into the MiFID Suitability Practice: Is a Standard Questionnaire the Answer http://www2.sa.unibo.it/seminari/Papers/20110125.
  • Markowitz, H.M. (1952). Portfolio Selection. Journal of Finance, 6, 77–91.
  • Maslow, A.H. (1943). A Theory of Human Motivation. Psychological Review, 50, 370–396.
  • Odean, T. (1999). Do Investors Trade Too Much? The American Economic Review, 89(5), 1279–1298.
  • Shefrin, H. (2000). Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing. Boston: Harvard Business School Press.
  • Shefrin, H. and Statman, M. (1985). The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence. Journal of Finance, 40, 777–790.
  • Shefrin, H. and Statman, M. (2000). Behavioral Portfolio Theory. Journal of Financial and Quantitative Analysis, 35(2), 127–151.
  • Smith, A. (1759). The Theory of Moral Sentiments. New York: Cosimo.
  • Thaler, R.H. (1985). Mental Accounting and Consumer Choice. Marketing Science, 4(3), 199–214.
  • Thaler, R.H. (2015). Misbehaving: The Making of Behavioral Economics. WW Norton & Company.
  • Thaler, R.H. (2016). Behavioral Economics: Past, Present and Future. American Economic Review, 106(7), 1577–1600.
  • Tversky, A. and Kahneman, D. (1981). The Framing of Decisions and the Psychology of Choice. Science, 211(4481), 453–458.
  • Von Neumann, J. and Morgenstern, O. (1944). Theory of Games and Economic Behaviour. Princeton: Princeton University Press.

Document Type

Publication order reference

Identifiers

ISSN
1644-9584

YADDA identifier

bwmeta1.element.desklight-62371ebc-2873-433f-863c-073c2aaaae87
JavaScript is turned off in your web browser. Turn it on to take full advantage of this site, then refresh the page.