Jason West

Retirement adequacy through higher contributions: is this the only way?

Australia is increasing the legislated minimum and compulsory provision of retirement savings for employees (known as the superannuation guarantee, SG) from 9% to 12% of salary. Using a simulation approach, the article finds that retirement adequacy generally improves under the increased SG provision, particularly if a relatively favorable sequence of returns is experienced over the employee’s working life. Using a variety of default options, the authors show that increasing the contributions of workers without appropriately altering the asset allocation strategy of their investments may expose them to greater sequencing risk, potentially undermining the objectives of the contribution increase. The retirement outcomes sought by increasing the SG can be achieved through a dynamic life-cycle approach to portfolio design without necessarily increasing the contribution rate.

Collaborative Patterns and Power Imbalance in Strategic Alliance Networks

Firms are connected with other firms through a variety of economic relationships that can be viewed as a form of social network. Resource-dependency theory (RDT) suggests that formal joint ventures among firms occur as a result of resource procurement, perceived strategic interdependence, expansion opportunities, legitimacy, and risk mitigation. A key unexplored element of RDT is the collaborative structure among firms with technical capabilities subordinate to their alliance partners and whether such structures are able to leverage sufficient market power to influence the industry sector within which they exist. Using the network characteristics of alliance partners in a technology- and capital-intensive industry sector, this work empirically examines the aggregate market power of so-called generalist firms. Collaborative patterns in the resources and mining sector and their impact on firm performance and resource quality are investigated using social network analysis. It is found that firms engaged in strategic alliances outperform firms operating independently; however, beyond a certain number of alliance partners, their performance declines. It was also found that, in aggregate, generalist nontechnical alliance partners can exercise significant market power in dense alliance networks, despite possessing almost no technical industry experience.

Conditional Allocations to Real Estate: An Antidote to Sequencing Risk in Defined Contribution Retirement Plans

In this article, the authors investigate the potential for real estate as an asset class to be exploited to protect against sequencing risk (or path dependency) in defined contribution retirement funds. Their results suggest that allocating both listed and unlisted real estate assets to retirement portfolios, even if very minor, can enhance the risk–return profile and probability of successfully achieving retirement outcomes. Using a bootstrap simulation approach, the authors test for a range of asset allocations that include real estate. In addition, they examine the sensitivity of real estate performance to changes in monetary policy to optimize portfolio outcomes for fund managers who actively seek exposure to real estate assets. Their findings indicate that the performance of real estate is highly dependent on monetary policy settings that, when used in a dynamic asset allocation process, have the potential to enhance portfolio returns while limiting the impact of downside risk.

Islamic Finance and the Resources Sector : A Natural Fit for Project Finance

The investment profile and particularly the horizon of traditional debt financing for projects seldom matches the returns on assets, particularly in the resources and infrastructure sectors where assets have a lengthy construction phase before realising a return. This mismatch in investment duration and risk-return profile is a key weakness of the Western approach to limited recourse borrowing under project financing conventions. The motives underlying Islamic finance however differ from the Western approach permitting longer-term investments and profit-sharing arrangements, subject to the strict practice of Shari ah law. This paper highlights the advantages of Islamic investment practices over traditional approaches in project financing which can potentially fill a significant gap in funding options for firms in the global resources sector.

Construction of the marginal abatement cost curve: retrofitting carbon capture and storage in Australia

Abstract Marginal abatement cost curves are a principal tool used for measuring the relative economic impact of emissions abatement mechanisms. Abatement curves can be constructed using either a top-down approach based on aggregated microeconomic models or using a bottom-up approach based on an engineering assessment that analyses different technical potentials for emission reductions. While top-down models offer simplicity and ease of interpretation, they are not as robust as the bottom-up approach, particularly for assessing the implications of new technologies such as carbon capture and storage (CCS). Using a bottom-up approach and incorporating real options analysis, this study redefines the relative abatement costs for retrofitting post-combustion CCS technology to coal-fired generators and then reconstructs the Australian marginal emissions abatement curve. The revised curve provides power generators and other industry sectors with more accurate and stable abatement cost estimates for these technologies relative to alternate abatement options.

Catastrophes and Insurance Stocks – A Benchmarking Approach for Measuring Efficiency

Abstract This study uses the numeraire portfolio to benchmark insurance stock returns as a natural measure for detecting abnormal insurance stock returns from catastrophic events. The assumptions underlying the efficient markets hypothesis using a numeraire denominated returns approach hold for catastrophic insurance events whereas other more traditional methods such as the market model and Fama-French three factor model often fail, typically due to the accumulation of estimation errors. We construct a portfolio of Australian insurance firms and observe the market reaction to major insured catastrophic events. Using the numeraire denominated returns approach we observe no particular trend in the cumulative abnormal returns of insurance securities following a catastrophic event. Using both the traditional market model and the Fama-French three factor model however, we observe significantly positive cumulative abnormal returns following an insured catastrophic event. The errors inherent in the market model and three factor model for event studies are shown to be eliminated using the numeraire denominated returns approach.

Withdrawal capacity in the face of expected and unexpected health and aged-care expenses during retirement

We examine the consequences of taking account of costs associated with age-related health treatment and agedcare services during the retirement phase. Simulating asset return data using historical bootstrap simulation, we derive an optimal withdrawal income during retirement using dynamic optimization techniques. The greatest risk to income sustainability occurs when unexpected health costs combine with above-average longevity for conservative investors. High costs of health treatment without a commensurate adjustment in asset allocation toward assets with a less conservative risk-return profile risk premature wealth depletion. The risk of ruin can be mitigated through a dynamic life-cycle strategy during the retirement phase.

Structured Islamic Finance Options for the Resources Sector

The investment profile and particularly the horizon of traditional debt financing for projects seldom matches the returns on assets, particularly in the resources and infrastructure sectors, where assets have a lengthy construction phase before realizing a return. This mismatch in investment duration and risk–return profile is a key weakness of the Western approach to limited-recourse borrowing under project financing conventions. The motives underlying Islamic finance differ, however, from the Western approach permittinglonger-term investments and profit-sharing arrangements,subject to the strict practice of Shariáh law. This article highlights the advantages of Islamic investment practices over traditional approaches in project financing, which can potentially fill a significant gap in funding options for firms in the global resources sector.

A Prediction Model Framework for Cyber-Attacks to Precision Agriculture Technologies

ABSTRACT There are two types of precision agriculture systems - those that have been hacked, and those that will be. Connectivity and information flow represent the two key enabling factors for successful operation of the digital farm. These factors also represent the highest vulnerability to cyber-attack to disrupt food production. We introduce a principles-based framework to assess cyber-attack vulnerabilities in the technology itself as well as in the environment to which it is adapted. This provides the elements needed to construct a precision agriculture system protected from cyber-attacks and appropriately matched to the complexity level of the technology in the field.

Teaching data science: an objective approach to curriculum validation

ABSTRACT Emerging careers in technology-focused fields such as data science coupled with necessary graduate outcomes mandate the need for a truly interdisciplinary pedagogical approach. However, the rapid pace of curriculum development in this field of inquiry has meant that curricula across universities has largely evolved in line with the internal disciplinary strengths of each institution rather than in response to the needs of graduates. To assist with the development of data science subjects the themes and content that contribute to each subject should be objectively validated. We propose the use of an objective test for data science curricula to quantify whether a particular degree programme maintains an interdisciplinary perspective unconstrained by single discipline bias. The test analyses a given curriculum and quantifies the subject components by category using natural language processing (NLP) techniques.