Wealth portfolios and elite professional athletes

Defined contribution pension plans typically rely on some type of lifecycle allocation investment strategy. This approach has recently been shown to be sub-optimal due to the portfolio size effect. The terminal wealth of individuals with steadily increasing earnings over time is significantly less when using a lifecycle strategy compared with a simple contrarian approach. The adverse effect of an inappropriate asset allocation strategy for investors with unorthodox earnings profiles, such as for professional athletes, can be greatly magnified. We demonstrate that strategies that exploit the portfolio size effect vastly dominates terminal wealth earned using lifecycle strategies for individuals who experience unorthodox earning profiles, particularly those generating high investable incomes early in life. While the lifecycle strategy contains some attractive features relating to risk aversion and diminishing utility from wealth, we demonstrate that for unorthodox earnings profiles the case for taking advantage of the portfolio size effect is particularly strong.     

Theorising South Africa’s Corporate Governance

South Africa’s principal corporate governance report aspires to an ‘inclusive’ approach to corporate governance, in which companies are clearly advised to consider the interests of a variety of stakeholders. Yet, in common with many other countries, there is little discussion of the theoretical foundations and assumptions implicit in the recommended approach to corporate governance. The purpose of this article is to provide an analysis of corporate governance and the corporate environment in South Africa in terms of existing theory and models of corporate governance, and to provide a critique based on a consideration of traditional African values and the socio-economic necessities of post-apartheid South Africa. The result is the identification of an incompatibility between the current corporate environment in South Africa and the given exposition of African values. Some prospects for change are then identified.     

Arts Vouchers to Replace Grants

The annual jostling among arts producers for Arts Council grants is symptomatic of a regressive system which taxes the poor to subsidise the leisure of the better-off Edwin West (right), Professor of Econmics at Carleton University, Ottawa, Canada, argues for a voucher system to subsidise the less-well-off individually, and examines how apprehensive art bureaucrats torpedoed a British pilot scheme     

Risk and return: Janaury vs. the rest of the year

This paper examines the seasonality in the basic relationship between expected return and risk during 1935–82. The results reveal that the positive relationship between return and risk is unique to January. The risk premiums during the remaining eleven months are not significantly different from zero.     

Observing the PSASB: ED 50 and the Recognition of Infrastructure Assets

Provisions of AAS 27 significantly expanding the recognition of assets in local government financial statements have proven to be controversial, particularly through their application to items of infrastructure. In one instance, state legislation was amended to overrule the standard. More recently, the standard itself has been amended to extend the relevant transitional provisions. To assist in explaining why an accounting issue ostensibly resolved through the due process of standard-setting continues to generate controversy, the responses to the exposure draft (ED 50) that preceded the standard were reviewed and analysed. This led to the conclusion that any inference that respondents to ED 50 generally supported the proposals relating to accounting for infrastructure items is, at best, problematic. This paper provides insights to standard-setting processes, particularly the workings of the Public Sector Accounting Standards Board and the extent of its responsiveness to parties affected by its deliberations.