Reading 5.1

insurance companies largest asset class

fixed income - to match projected cash flows

dividends or interest have lower tax rate

divdiends

two strategies to reduce the impact of taxation

tax loss harvesting

strategic asset location

key in puts when optimizing asset allocation

expected reutnr

volatility

correlation of assets

where does the sucess of tactical asset allcoation lie

the timing of it.. not the actual security selection

how can market sentiment be assed

-margin borrowing

-short interest (short selling)

-vol indexes

how can vol be indicated

usuing bid ask spread on index options

(increases w more purchases of pus and decreases with calls)

systematic approach

quanititaive view

using strategies that have been historically predicatable and persistent

two main factors in systematic approach

value and momentum

loss aversion

dislike losses more than like gains

illusion of control is which type of bias

hindsight- past good choices make you think you cna do it again

mental accounting

seperating A/L into seperate buckets

representative bias

attache importance to recent data

i.e. shift allocation to assets that have preforemd well recently

availability bias

easily recalled events influence deicsions