Preprint Article Version 1 This version is not peer-reviewed

Stable Value Funds Performance

Version 1 : Received: 16 December 2017 / Approved: 18 December 2017 / Online: 18 December 2017 (09:22:13 CET)

A peer-reviewed article of this Preprint also exists.

Babbel, D.F.; Herce, M.A. Stable Value Funds Performance. Risks 2018, 6, 12. Babbel, D.F.; Herce, M.A. Stable Value Funds Performance. Risks 2018, 6, 12.

Journal reference: Risks 2018, 6, 12
DOI: 10.3390/risks6010012

Abstract

Little in the scholarly economics literature is directed specifically to the performance of sta­ble value funds, although they occupy a leading place among retirement investment vehicles. They are currently offered in more than one-third of all defined contribution plans in the USA, with more than $800 billion of assets under management. This paper rigorously ex­amines their performance throughout the entire period since their inception in 1973. We produce a composite index of stable value returns. We next conduct mean-variance analysis, Sharpe and Sortino ratio analysis, stochastic dominance analysis, and optimal multi-period portfolio composition analysis. Our evidence suggests that stable value funds dominate (on average) two major asset classes based on a historical analysis, and that they often occupy a significant position in optimized portfolios across a broad range of risk aversion levels. We discuss factors that contributed to stable value funds’ past performance and whether they can continue to perform well into the future. We also discuss considerations regarding whether or not to include stable value as an element in target date funds within defined con­tribution pension plans.

Subject Areas

stable value; defined contribution; optimal asset allocation; stochastic dominance

Readers' Comments and Ratings (0)

Leave a public comment
Send a private comment to the author(s)
Rate this article
Views 0
Downloads 0
Comments 0
Metrics 0
Leave a public comment

×
Alerts
Notify me about updates to this article or when a peer-reviewed version is published.