Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOR
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Retirement
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Retirement

The Journal of Retirement

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOR
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

Alpha, Beta, and Now… Gamma

David Blanchett and Paul Kaplan
The Journal of Retirement Fall 2013, 1 (2) 29-45; DOI: https://doi.org/10.3905/jor.2013.1.2.029
David Blanchett
is the head of retirement research at Morningstar Investment Management in Chicago, IL.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: david.blanchett@morningstar.com
Paul Kaplan
is a director of research at Morningstar Canada in Toronto, Canada.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: paul.kaplan@morningstar.com
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 

Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600

Abstract

Investors arguably spend the most time and effort selecting “good” investment funds/managers—the so-called alpha decision—as well as on the asset-allocation, or beta, decision. However, alpha and beta are just two elements of myriad important financial planning decisions, many of which can have a far more significant impact on retirement income.

The authors present a concept that they call “gamma,” designed to quantify how more intelligent financial planning decisions can add value, measured through a certainty-equivalent, utility-adjusted retirement income metric, and focused on five fundamental financial planning decisions/techniques: a total wealth framework to determine the optimal asset allocation, a dynamic withdrawal strategy, incorporating guaranteed income products (i.e., annuities), tax-efficient decisions, and liability-relative asset allocation optimization.

Using a Monte Carlo simulation, the authors estimate that 22.6% more in certainty-equivalent income can be generated using a gamma-efficient retirement income strategy as compared to a base scenario. Unlike traditional alpha, which can be hard to predict and is a zero-sum game, the authors find that gamma (and gamma equivalent alpha) can be achieved by anyone following an efficient financial planning strategy.

TOPIC: Retirement, legal/regulatory/public policy, wealth management

  • © 2013 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Retirement: 1 (2)
The Journal of Retirement
Vol. 1, Issue 2
Fall 2013
  • Table of Contents
  • Index by author
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Retirement.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Alpha, Beta, and Now… Gamma
(Your Name) has sent you a message from The Journal of Retirement
(Your Name) thought you would like to see the The Journal of Retirement web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Alpha, Beta, and Now… Gamma
David Blanchett, Paul Kaplan
The Journal of Retirement Oct 2013, 1 (2) 29-45; DOI: 10.3905/jor.2013.1.2.029

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Alpha, Beta, and Now… Gamma
David Blanchett, Paul Kaplan
The Journal of Retirement Oct 2013, 1 (2) 29-45; DOI: 10.3905/jor.2013.1.2.029
del.icio.us logo Digg logo Reddit logo Twitter logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • BEYOND BETA AND ALPHA
    • GAMMA FACTORS
    • MEASURING GAMMA
    • GAMMA TESTS
    • SIMULATION AND BOOTSTRAPPING
    • TEST 1: TAX-EFFICIENCY
    • TEST 2: TOTAL WEALTH ASSET ALLOCATION, ANNUITY ALLOCATION, DYNAMIC WITHDRAWAL STRATEGY, AND LIABILITY-RELATIVE OPTIMIZATION
    • RESULTS
    • PUTTING IT ALL TOGETHER
    • IMPLEMENTATION
    • CONCLUSION
    • APPENDIX A
    • APPENDIX B
    • APPENDIX C
    • APPENDIX D
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • Do Advisors Improve 401(k) Plans?
  • Corrections Should Trigger Rebalancing
  • The Value of Allocating to Annuities
  • The Value of a Gamma-Efficient Portfolio
  • To Roll or Not to Roll: A Framework for Assessing the Benefit of IRA Rollovers
  • Defaulting Participants in Defined Contribution Plans into Annuities: Are the Potential Benefits Worth the Costs?
  • Total Wealth Allocation: Liquidity, Longevity, and Legacy
  • Dynamic Choice and Optimal Annuitization
  • Allocating to a Deferred Income Annuity in a Defined Contribution Plan
  • Can Collars Reduce Retirement Sequencing Risk? * Analysis of Portfolio Longevity Extension Overlays (LEO)
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log In
  • Update your profile
  • Give us your feedback

© 2022 Pageant Media Ltd | All Rights Reserved | ISSN: 2326-6899 | E-ISSN: 2326-6902

  • Site Map
  • Terms & Conditions
  • Cookies
  • Privacy Policy