Optimal Investment Strategy to Minimize the Probability of Lifetime Ruin

Abstract

I study the problem of how individuals should invest their wealth in a risky financial market to minimize the probability that they outlive their wealth, also known as the probability of lifetime ruin. Specifically, I determine the optimal investment strategy of an individual who targets a given rate of consumption and seeks to minimize the probability of lifetime ruin. Two forms of the consumption function are considered: (1) The individual consumes at a constant (real) dollar rate, and (2) the individual consumes a constant proportion of his or her wealth. The first is arguably more realistic, but the second has a close connection with optimal consumption in Merton’s model of optimal consumption and investment under power utility.

For constant force of mortality, I determine (a) the probability that individuals outlive their wealth if they follow the optimal investment strategy; (b) the corresponding optimal investment rule that tells individuals how much money to invest in the risky asset for a given wealth level; (c) comparative statics for the functions in (a) and (b); (d) the distribution of the time of lifetime ruin, given that ruin occurs; and (e) the distribution of bequest, given that ruin does not occur. I also include numerical examples to illustrate how the formulas developed in this paper might be applied.     

Influence of economic crisis on new SME survival: reality or fiction?

The aim of this research was to analyse the survival of new ventures during periods of economic crisis. The article compares survival probability during growth and crisis periods. An empirical study was used to analyse new venture survival probability. Results show that new firms have a greater likelihood of surviving during crisis periods than they do during growth periods. An additional aim of the study was to analyse the survival probability of opportunity and necessity entrepreneurs during crisis periods. Results show that gaps in survival likelihood between opportunity and necessity entrepreneurship are bigger during times of crisis than they are during growth periods.     

Relational care in communication as the basis of nonprofit fundraising: Theorizing professional ethics based in stewardship and ethics of care

At its core, fundraising is relationship building. Therefore, ethical fundraising requires cultivating genuine, care-based relationships between various stakeholders by considering relational goals and communicative practices. We advance an ethics of care-oriented approach toward fundraising based in nurturing authentic relationships with multiple organizational stakeholders, including donors, employees, beneficiaries, and volunteers. Drawing upon ethics of care and stewardship scholarship based in public relations, the purpose of this article is to propose relational care in communication through dialogue as an ethical springboard of nonprofit fundraising.     

Board of director attributes: effects on financial performance in SMEs

International Entrepreneurship and Management Journal - This paper analyses the relationship between board of director (BoD) attributes and financial performance in small and medium-sized...     

“When I go my family will see my life in programmes”: Legacy giving and identity at the Royal Opera House

With £5.5 trillion due to be transferred between generations over forthcoming decades in the UK alone, non-profits stand to increase their income from legacy giving significantly, if they can make lasting and meaningful connections with donors. Extant research suggests that autobiographical memory may play a key role in this process. In this article, we go beyond considering autobiographical memory in general to examining how connection with a particular non-profit, and the memories that are generated can shape individual identity. We report the results of twenty life-history interviews with people who plan to leave a legacy to the Royal Opera House, and discuss how identity is created through a connection with opera and/or ballet in general and the Royal Opera House in particular. We then go on to explore how the strength of that connection and development of a shared identity can create a sense of symbolic immortality and influence the legacy giving decision, drawing on peak memorable experiences and nostalgia as a social emotion that connects people to what they love. We conclude by reflecting on how other non-profits might create or stimulate such identities.