Academic journal article Financial Services Review

From the Editor

Academic journal article Financial Services Review

From the Editor

Article excerpt

1. Introduction

The third issue of Volume 17 contains an interesting collection of articles. The lead article by Stephen Horan and Thomas Robinson, both of the CFA Institute, develop a model to value annuities on an after-tax basis. They show that qualified and nonqualified annuities are equivalent to a tax-deferred account plus a cost basis tax shield. They further show that die after-tax value of an annuity decreases as the investment horizon increases, but is independent of the risk of die underlying investment.

The second article by Bill Reichenstein of Baylor University provides a comment on Horan and Robinson's article. Reichenstein notes that he agrees with Horan and Robinson on a number of issues, but disagrees about die risk appropriate discount rate and, therefore, after-tax value of assets held in taxable accounts and assets that earn tax-deferred returns. This article details his viewpoint on calculating the after-tax values of these assets and provides an interesting contrast to Horan and Robinson.

The third article by Christine McClatchey and Cris de la Torre of University of Northern Colorado provides a very timely discussion of the mortgage lending process. They present a procedure that borrowers or financial planners can utilize to accurately compare loan products. They also document many of the abuses borrowers must be aware of, including the widespread misuse of die yield spread premium. This article should be of interest to botti academics and practitioners.

The fourth article by Cliff Mayfield, Grady Perdue, and Kevin Wooten, all of University Clear Lake, provides an interesting contrast to our typical article by taking a behavioral look at investing intentions. They examine several psychological antecedents to short-term and long-term investment intentions. They find that individuals who are more extraverted intend to engage in short-term investing, while those who are higher in neuroticism and/or risk aversion avoid this activity. Their findings have the potential to allow financial advisors to identify specific personality types, which will enable them to create education programs to address investors specific requirements. …

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