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Welcome to the 2018 AFS Annual Meeting, being held this year, in conjunction with FPA in Chicago!

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Oral Session [clear filter]
Wednesday, October 3
 

2:00pm

H1b - Exploring the Effect of Financial Literacy on Financial Risk Tolerance: Evidence from the 2016 Survey of Consumer Finances
We examined the association between financial literacy and financial risk tolerance of US households using the 2016 Survey of Consumer Finances (SCF) dataset.  Results from three logistic regressions on cumulative components of the risk tolerance variable showed that both objective and perceived financial knowledge were positively related to financial risk tolerance. Specifically, objective financial knowledge was positively associated with both willingness to take some risk and high risk while perceived knowledge was positively associated with willingness to take high and substantial risk. This study is the first to estimate the effects of financial literacy on the traditional SCF risk tolerance variable.

Author(s): Kyoung Tae Kim, Sherman D. Hanna

Presenters
avatar for Sherman Hanna

Sherman Hanna

Professor, Ohio State University


Wednesday October 3, 2018 2:00pm - 3:00pm
Michigan 1A

3:30pm

I2a - Understanding a Client’s Impulse to Help Others: How Self Efficacy Relates to Giving Money and Time Away
It is often the case that a client’s desire to help others through the giving of their money (charitable donations) and time (volunteer hours) is very strong, especially in America. According to the Almanac of American Philanthropy, the U.S., is the leading nation in charitable giving. According to the Charities Aid Foundation, the U.S. has the second highest volunteer score in the world. But, not every client prioritizes giving as an important goal in their financial plan. Why do some clients give, while others do not?  This study explores the concept of self-efficacy empirically, showing that those with higher self-efficacy are associated with a higher probability of helping behavior (e.g., giving money or time), as predicted by both Social Cognitive Theory and an adapted Theory of Planned Behavior. Given this association, a planner can better predict and incorporate into a comprehensive financial plan their client’s charitable intention through assessing their client’s general self-efficacy.

Author(s): Shane Enete, Stuart Heckman

Presenters
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Shane Enete

Assistant Professor of Finance, Biola University and Kansas State Univeristy


Wednesday October 3, 2018 3:30pm - 4:30pm
Michigan 1B

3:30pm

I2b - Financial Knowledge and Financial Confidence as Mediators Between Gender and Positive Financial Behaviors
A multiple mediation model is used to explore the role of financial knowledge and financial confidence as mediators between gender and positive financial behaviors in a sample of 2015 NFCS respondents who indicated that they were the only adult in the household. Results suggest that gender differences in financial behaviors exist, but they can be eliminated with increased attention to the financial knowledge and confidence of women. Financial planners, therapists, and educators can use these results to target financial education programs toward women with an emphasis on not just delivering financial knowledge to women, but also encouraging them to seek out financial education and cultivating their confidence to apply it when given the opportunity to do so.

Author(s): Somer G. Anderson, Camila Haselwood, Martin C. Seay

Presenters
SA

Somer Anderson

Assistant Professor-Accounting and Assistant Dean, John E. Simon School of Business, Maryville University


Wednesday October 3, 2018 3:30pm - 4:30pm
Michigan 1B

3:30pm

I3a - The Sustainable Growth Rate, DuPont Analysis, and the Cross-Section of Returns
We investigate the sustainable growth rate and DuPont components for asset pricing and portfolio performance evaluation. Employing data from 1990 through 2012 and a three-component DuPont ROE, we present evidence indicating that long short investment strategies based on sustainable growth rate, ROE, profit margin, and asset turnover yield significant positive alphas while long-short investment strategies based on the equity multiplier yield significant negative alphas. Surprisingly, the long-short portfolios based on equity multiplier produced significant alpha even in the following two quarters.

Author(s): Yuntaek Pae, Omid Sabbaghi, Navid Sabbaghi

Presenters
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Yuntaek Pae

Assistant Professor of Finance, Central Washington University


Wednesday October 3, 2018 3:30pm - 4:30pm
Michigan 1C

3:30pm

I3b - Vulnerable to What?: A Measurement Model for Predicting Vulnerability to Financial Hardship
The focus in financial decision-making has shifted from normative to subjective measures of financial wellness. While subjective measures bring the voice of the consumer into the study of financial well-being, there are still objective financial realities to consider. We provide a framework for thinking of financial vulnerability as the risk of financial hardship (i.e., the experience of physical and/or emotional distress related to his or her ability to maintain a standard of living). In this view, financial vulnerability is not a condition but the risk (or probability) of experiencing a negative financial condition. Our study seeks to offer a means of providing a tangible score of one’s vulnerability to financial hardship while illuminating the factors influencing one’s vulnerability. Using the 2016 CFPB National Financial Well-Being Survey, we find that a combination of demographics, behaviors, and social-psychological indicators offers the most comprehensive picture of an individual’s vulnerability to financial hardship.

Author(s): Dee Warmath, Genevieve Elizabeth O’Connor, Casey E. Newmeyer, Nancy Wong

Presenters
DW

Dee Warmath

Assistant Professor, University of Georgia


Wednesday October 3, 2018 3:30pm - 4:30pm
Michigan 1C

3:30pm

I4a - Issues with the Transition Mechanism in the Actuarial Approach to Retirement Spending
This paper highlights some issues with the actuarial retirement withdrawal strategy. Potential problems exist with the transition mechanism (present value of an annuity calculation) as the retiree ages.  With poor initial returns the actuarial approach does not cut spending quickly enough, due to the mathematics of the annuity formula.  In addition, spending rates can be too high or too low initially depending on the assumed discount rate, which can result in the inefficient spending down of wealth. If a future value is specified as a bequest/safety net, the minimum annual spending over the 30-year period decreases as the future value increases. The effect of a desired future value on annual spending volatility depends on whether the actual subsequent compounding rate is high or low. An increase in the desired future value results in smaller initial withdrawals, with the portfolio’s recovery dependent on future returns.  As remaining longevity declines with a constant future value, large (small) positive returns as the retiree ages force the transition mechanism (PVAN) to significantly increase (not significantly increase) the annual withdrawal, thus increasing (decreasing) the standard deviation.  This effect can possibly turn annual spending negative. Therefore the actuarial approach, while providing solutions to some issues, creates new ones.

Author(s): Ken Johnston, John Hatem, Thomas Carnes, Arman Kosedag

Presenters
KJ

Ken Johnston

Associate Professor of Finance, Berry C


Wednesday October 3, 2018 3:30pm - 4:30pm
Michigan 2