Behavioral Finance and Wealth Management

I have just finished reading a book named “Behavioral Finance and Wealth Management” by Michael M. Pompian, CFA, CFP

The author, who obtained both of the 2 renowned credentials and has spent a long time in the profession, shared his perspective about how behavioral finance can help better service the clients in portfolio management. 

He started the book by providing essential information about behavioral finance (its history, development, key people, etc.).

I think one of the most important points the author made is to distinguish between standard finance and behavioral finance. He quoted Meir Statman’s “People in standard finance are rational. People in behavioral finance are normal.”  

• ·      Behavioral finance studies the effects of human emotions and cognitive errors on financial decisions, i.e. the application of psychology to finance. On the other hand, standard finance theory is designed to provide mathematically elegant explanations for financial questions and relies on a set of assumptions that oversimplify reality. The key notion of standard finance is “Homo Economicus” (rational economic man) which prescribes that humans make perfectly rational economic decisions at all times. The reasons for using such concept are to make economic analysis relatively simple and to quantify the economic findings. The threes underlying assumptions for this Homo Economicus, namely Perfect Rationality, Perfect Self-Interest and Perfect Information, are heavily criticized.
• ·    Standard finance is built on rules about how investors “should” behave, rather than on principles describing how they actually behave. Behavioral finance attempts to identify and learn from the human psychological phenomena at work in financial markets and within individual investors.
• ·        Standard finance grounds its assumptions in idealized financial behavior; behavioral finance grounds its assumptions in observed financial behavior.

It should be reminded again that there is a big gap between standard and behavioral finance, between theory and real life.

Behavioral finance is classified into 2 groups:

• ·        Behavioral Finance Micro: examines behaviors or biases of individual investors that distinguish them from the rational actors envisioned in classical economic theory. The key question would be: “Are individual investors perfectly rational, or can cognitive and emotional errors impact their financial decisions?”
• ·        Behavioral Finance Macro: detects and describes anomalies in the efficient market hypothesis that behavioral models may explain. The key question would be “Are markets efficient or are they subject to behavioral effects?”

Among the 2 groups, Finance Micro surely has more applications in wealth management profession. That’s also the focus of the book – how cognitive and emotional errors can impact investors’ financial decisions and how financial advisors should react to help the customers to overcome those errors. The author proposed a framework to treat the errors differently based on type of errors (cognitive or emotional) and based on customers’ financial situations.

Financial advisors should constantly remind themselves that: Investor-Advisor relationship is similar to other kinds of relationship. Investment results are not the primary reason that a client seeks a new advisor. The number-one reason that practitioners lose clients is that clients do not feel as though their advisors understand, or attempt to understand, the clients’ financial objectives. By getting inside the head of the client and developing a comprehensive grasp of her motives and fears, the advisor can help the client to better understand why a portfolio is designed the way it is and why it is the “right” portfolio for her – regardless of what happens from day to day in the markets.

The author then cited the guidance of Kahneman and Riepe for financial advisor: “To advise effectively, advisors must be guided by an accurate picture of the cognitive and emotional weaknesses of investors that relate to making investment decisions: their occasionally faulty assessment of their own interests and true wishes, the relevant facts that they tend to ignore, and the limits of their ability to accept advice and to live with the decisions they make.”

The book then seeks to help financial advisors to deal with 20 most common investor biases. With each bias, the author provides the readers with definition, description, classification, practical application, research review, diagnostic tests and advice. So it would be very convenient for the advisor to look up for the bias that they find with their customers and deal with them effectively.

Overconfidence: people think they are smarter and have better information than they actually do. Wealth hazards:

-          Unfounded belief in own ability to identify companies as potential investments

-          Excessive trading

-          Underestimating downside risks

-          Portfolio under-diversification

1.  Representative: people categorize and classify to wrongly simulate the situation based on their experiences. Two primary interpretations are Base-rate Neglect (relying on stereotypes) and Sample-size Neglect (the sample is not representative of the population).
2. Anchoring and adjustment: When required to estimate a value with unknown magnitude, people generally begin by envisioning some initial, default number – an anchor – which they then adjust up or down to reflect subsequent information and analysis. Regardless of how initial anchors were chosen, people tend to adjust their anchors insufficiently and produce biased end approximations.
3. Understanding anchoring and adjustment can be powerful asset when negotiating. When negotiating, it is wise to start with an offer much less generous than reflects your actual position. Conversely, if a rival negotiator makes a first bid, do not assume that this number closely approximates a potential final price.
4. Cognitive dissonance: the mental discomfort when newly acquired information conflicts with preexisting understandings. People try to convince themselves that the new information is incorrect or stick to their false original decision.
5. Availability: a rule of thumb, or mental shortcut, that allows people to estimate the probability of an outcome based on how prevalent or familiar that outcome appears in their lives.
6. Self-attribution: the tendency of individuals to ascribe their successes to innate aspects, such as talent or foresight, while more often blaming failures on outside influences, such as bad luck.
7. Illusion of control: describes the tendency of human beings to believe that they can control or influence outcomes when, in fact, they cannot.
8. Conservatism: a mental process in which people cling to their prior views or forecasts at the expense of acknowledging new information.
9. Ambiguity aversion: people do not like to gamble when probability of distributions seem uncertain. People who are ambiguity averse may not be investing in certain equity asset classes because they demand too high an equity premium. Financial education is the solution
10. Endowment: People value an asset more when they hold property rights to it than when they don’t. If out-of-pocket costs are viewed as losses and opportunity costs are viewed as foregone gains, the former will be more heavily weighted. Two common mistakes caused by endowment bias: investors may hold onto securities that they already own (1) in order to avoid the transaction costs associated with unloading those securities (2) because of familiarity. (3) Because that they inherited them.
11. Self-control bias: a human behavioral tendency that causes people to consume today at the expense of saving for tomorrow and thus fail to plan for retirement or make asset-allocation imbalance.
12. Optimism
13. Mental accounting: People’s tendencies to code, categorize, and evaluate economic outcomes b grouping their assets into any number of nonfungible (noninterchangeable) mental accounts.
14. Confirmation: refers to a type of selective perception that emphasizes ideas that confirm our beliefs, while devaluing whatever contradicts our beliefs

“It is the peculiar and perpetual error of the human understanding to be more moved and excited by affirmatives than by negatives.” – Francis Bacon

   

   15.  Hindsight: The tendency to perceive that the event was predictable – even if it wasn’t.

   16.  Loss aversion: Psychologically, the possibility of a loss is on average twice as powerful a motivator as the possibility of making a gain of equal magnitude. Loss aversion can prevent people from unloading unprofitable investments, even when they see little to no prospect of a turnaround. It can also causes investors to sell winning positions too early, fearing that their profits will evaporate otherwise (this behavior limits the upside potential of a portfolio and can lead to overtrading) => This is a bias that I often commit as I am too risk averse and timid to take on challenge.

“Win as if you were used to it, lose as if you enjoyed it for a change.” – Ralph Waldo Emerson

   17.  Recency: A cognitive predisposition that causes people to more prominently recall and emphasize recent events and observations tan those that occurred in the near o distant past.

“The past and present are our means; the future alone is our goal.” – Blaise Pascal (1623-1662)

   18.  Regret aversion: The fear that whatever course they select will prove less than optimal. This bias seeks to forestall the pain of regret associated with poor decision making, causing investors to hold onto losing positions too long in order to avoid admitting errors and realizing losses. This bias would lead to investing too conservatively, staying out of the market after a loss, holding losing/winning positions too long, herding behavior and limited preference for famous companies

   19.  Framing: the tendency of decision makers to respond to various situations differently based on the context in which a choice is presented. This should be paid a lot of attention as thing presented will be viewed differently depending whether it is framed positively or negatively.

“You better cut the pizza in four pieces, because I’m not hungry enough to eat six” – Yogi Berra.

  20.  Status quo: An emotional bias that predispose people facing an array of choice options to elect whatever option ratifies or extends the existing condition in lieu of alternative options that might bring about change.

“Whoever desires constant success must change his conduct with the times” – Niccolo Machiavelli

I think this book will be very useful for financial advisor to understand their clients’ problems/issues and better communicate with them. The author also discussed some case studies as well as some special topics in behavioral finance. The case studies would be interesting in behavioral finance courses and the special topics would be food for thought for those who are curious about what would be the next steps in the field.

Some hints for starting a research

1.     Read the article and outline the main points

2.     Point out the suspicious points of the article and the points that can be developed/improved

3.     Check whether there is a similar study improving the article or not

·        If there is a good method which can be used, then update

·        Other articles will be used for literature review

·        If the article was improved already, then find another one

4.     Draw a diagram (by hand) how the study was carried out

5.     Collect the data similar to the study

6.     Use the data and the diagram to replicate the study

7.     Check whether the result is consistent

8.     List the new ideas and draw new diagram

9.     Build the new model with new ideas

! At immediate level, writing a new code is much easier than modifying the code written by someone else. Of course at advanced level, you can do whatever you want.

! Do not use user-defined function if that is not a function you created because it will easily confuse you. Once you write a code yourself, you can extract a part of the code and make a function.

About annuity - information from various sources (Progress Report 2)

The books do not involve directly to the topic I am interested in now but they somehow provide some useful information about annuities and pension funds. From tomorrow, I will focus on reading articles.

Human Resource Management – Gary Dessler

Managing Human Resource – Bohlander, Snell, Sherman

• Social security provides 3 types of benefits payable if employee is insured under the Social Security Act:

ü Retirement income at the age of 62 and thereafter

ü Survivor’s or death benefits payable to the employee’s dependents regardless of age at time of death

ü Disability benefits payable to disabled employees and their dependents

• The Medicare program, which provides a wide range of health services to people 65 or over, is also administered through the Social Security system.
• Social Security is paid for by a tax on the employee’s wages, shared equally by employees and employer. If you are self-employed, you pay the entire sum less 2% of your self-employment income.
• Types of pension plans:

ü Defined benefit pension plan: contains a formula for determining retirement benefits.

ü Defined contribution plan: employer’s contribution to employees’ retirement or saving funds is specified. The benefits depend on both the amounts contributed to the fund and the retirement fund’s investment earnings. The contributions may be made through profit sharing, thrift plans, matches of employee contributions, employer-sponsored Individual Retirement Accounts (IRAs).

ü 401(k) plan:

v Based on Section 401(k) of the Internal Revenue Code, employees can have a portion of their compensation (which would otherwise be paid in cash) put into a company profit-sharing or stock bonus plan by the employer. This results in a pretax reduction in salary. so the employee isn’t taxed on those set-aside dollars until after she retires (or removes the money from the pension fund)

v Some employers may match a portion of what the employee contributes to the 401(k) plan (contributory plan) or may not match (noncontributory plan). Employers usually choose 401(k) providers (such as investment firms) to set up and administer their 401(k) plan.

v To encourage employees to save for retirement, some employers are making enrollment in their 401(k) mandatory

v Who qualifies: Employees at least 1 years old having one year of service

v Who benefits most: people in plans with generous term, such as matching contributions from employer

v How much can be saved each year: tax-deferred up to $10,000, or the maximum permitted by your plan. After-tax, if allowed: up to the maximum permitted by your plan, but combined savings can’t top $30,000 or 25% of pay

v Contributions are tax-deferred and some plans also allow after tax savings.

v Rollovers permitted into IRAs and other qualified plans.

v How are withdrawals taxed: Ordinary income-tax rates apply to withdrawals of tax-deferred contributions and any investment earnings. No tax on withdrawals of after-tax contributions, loans from your account, or rollovers an IRA or new employer’s 401(k)

v Penalties for early withdrawals: Additional 10% tax on withdrawals made before age 59 ½.

v Exceptions to penalties – early withdrawals made: (1) By your beneficiaries at your death (2) By diagnosis of severe disability (3) To pay medical expenses in excess of 7.5% of gross income (4) In equal installments intended to last the rest of your life (5) Upon leaving your job after age 55.

v Minimum-distribution rules: Employees can continue to contribute as long as they’re working. But if you are a 5% or more owner or retired, you generally must begin withdrawing money from the plan by April 1 of the year after you turn 70 ½. The minimum payout depends on your life expectancy or the joint life expectancy of you and a beneficiary.

v If your plan offers loans, you can get quick access to your savings by borrowing against your account.

ü Deferred profit-sharing plan: employers typically contribute a portion of their profits to the pension fund, regardless of the level of employee contribution

ü An employee stock ownership plan (ESOP): a qualified, tax-deductible stock bonus plan in which employers contribute stock to a trust for eventual use by employees

• According to Employee Retirement Income Security Act, pension funds are vested funds – the money that have been placed cannot be forfeited for any reason.
• According to the Pension Benefit Guarantee Corporation (PBGC), more and more employers are terminating their defined benefit plans and replacing them with uninsured defined contribution. One reason for this is that the accounting profession’s “Employers Accounting for Pensions” rule (FASB 87), requires employers with defined benefits plans to estimate on their balance sheets the size of the employers’ liability.
• Golden offerings: offers to current employees aimed at encouraging them to retire early, perhaps even with the same pensions they would expect if they retired at age 65. Early retirement window: a type of golden offering by which employees are encouraged to retire early, the incentive being liberal pension benefits plus a cash payment.

Questions:

1. Should we stimulate risk for a pension fund itself?
2. Should we stimulate a case against Milevsky ‘s conclusion about a bond-type person should borrow to increase stock exposure?

The Role of Annuity Markets in Financing Retirement – 2001 – Jeffrey R. Brown, Olivia S. Mitchell, James M. Poterba, Mark J. Warshawsky

Distinguish annuities along:

ü Time of payment: (1) Immediate annuities: Begin making payment immediately after the payment of the premium (2) Deferred annuities: do not make payments until some date in the future. Deferred annuities receive favorable tax treatment during the accumulation phase, and in many cases it is possible to withdraw assets from these annuities without conversion to a life-long income stream. Before the payments commence, the premium dollars can be invested at a fixed rate or in a portfolio of risky assets (variable annuity).

ü Number of lives covered

ü Bequest option

ü Period certain guarantees (or refund option): provide some additional payments to a beneficiary in the event that the insured individual dies shortly after annuitization.

ü Type of payout: (1) Fixed nominal annuities: offer payments that are constant in nominal terms (2) Graded annuties: increase at a predetermined percentage rate (3) Inflation-indexed annuities: Rise with the rate of inflation (4) Variable annuity: payouts are linked to an underlying portfolio of assets, and will rise and fall according to a predetermined relationship with that portfolio’s value.

Factors that lead people to annuitize less than their full wealth:

ü Leave a bequest

ü Uncertainty about uninsured medical and long-term care needs or other potential expenditures

ü Desire for liquidity and control

ü Various capital market imperfections

Money’s worth of an annuity:

ü The ratio of the expected discounted value of its future payments to its initial purchase price (or policy premium). Calculations depend on the annuity payout amounts available in the private market, mortality rates and interest rates.

ü Useful for determining the degree to which private market annuity prices deviate from their actuarially fair level

ü Useful to decompose differences between a money’s worth values and the actual observed money’s worth value into a component attributable to adiminstrative costs and a component due to differences between the life expectancy of annuitants and that of the general population (adverse selection).

Utility-based annuity indicators: How an annuity might be valued by a risk averse life-cycle individual or couple. Objective: To gauge the economic value of annuitization by comparing utility levels with and without an annuity market.

ü Wealth equivalence: An individual starts off with wealth outside an annuity and has no access to annuity markets (cannot purchase an annuity). The wealth equivalence is the fraction of wealth that the individual would require to achieve the same level of utility that he attains with his nonannuitized money, if she instead devoted this fraction of his wealth to annuity. This indicator is smaller than 1 for risk averse person as annuity provide a valuable form of insurance.

ü Annuity equivalent wealth: This indicator assumes that an individual has an amount of fully annuitized wealth and then considers the consequences of closing the annuity markets. How much the individual’s wealth would need in order to generate the same utility level without annuities.

Annuity Markets and Pension Reform – George A. (Sandy) MacKenzie

Principal forms annuities can take

Duration of distribution phase

ü Life only or whole annuity – the annuitant’s post-annuitization lifetime

ü Certain annuity – a fixed period, whether or not the annuitant lives to the end of it

ü Temporary annuity – the shorter of a specified period and the annuitant’s post-annuitization lifetime.

Form regular payment

ü Level (fixed in nominal terms)

ü Fixed initially in norminal terms, with periodic step increases at a predetermined rate (titled, escalating, or rising)

ü Variable

§ Minimum payment guaranteed

§ Minimum payment guaranteed with increases irreversible

§ Variable payment depending on performance of underlying assets (investment risk borned entirely by annuitant)

§ With profit

ü Indexed

§ Indexed with cap on increase in percentage terms (limited price indexed)

§ Fully indexed (index-linked)

Premium payment arrangements

ü Immediate single payment

ü Regular payments (for a deferred annuity)

Timing of income payments

ü Immediate (payments commence at the end of the first period after annuitization, usually a month)

ü Deferred (payments begin some time after annuitization)

Rights of survivorship

ü Single life (where payments cease upon the annuitant’s death)

ü Joint-life annuity (where payemnts cease when one of the lives covered dies)

ü Joint-survivor annuity (payments (usually reduced) continue until the death of the second life; with symmetric joint-life annuity, payment is the same regardless of which spouse survives; with contingent annuity, payment to one may be lower than to the other)

Guarantee features

ü Certain and life (period-certain) annuity – payments are made for a minimum specified period, even if the annuitant dies before the period ands

ü Refund of premium annuity – payments are made until their sum equals the value of the premium

Other

ü Impaired lives

Annuity markets – Edmund Cannon and Ian Tonks

Additional to longevity risk and investment risk, there are three sources of retirement income risk faced by individuals: (a) replacement rate inadequacy, since their savings may be insufficient to maintain an adequate standard of living in retirement (b) social security risk: if the government changes the retirement benefit system (c) inflation risk

Three ways of accessing retirement funds: (1) as a lump sum (2) phased withdrawals: with limits on the amounts of the funds that the pensioner can access (3) annuitization

Research Proposal (Progress Report 3)

Research proposal

Title: Essays about private retirement planning

Motivation:

The aging trends is ominous around the world, not only in developed countries but also in developing countries. Furthermore, with the pension reform taking place in many countries, changing from defined benefit to defined contribution schemes, individuals now have more responsibilities in minding their own retirement planning.

In my research, I would like to study about how a person accumulate wealth and spend the accumulated amount for her retirement. The aim is to contribute to the literature of personal financial planning and give recommendations to help build up effective and consistent retirement scheme for each individuals. Retirement benefit is an essential part of social security, which in turn is vital to maintain the stability of the society.

Literature Review:

The core of my research is based on a book written by Moshe A. Milevsky, “Are you a stock or a bond? Create your own pension plan for a secure financial future” and a line of articles about pension and retirement planning developed by my supervisor, Professor Wade D. Pfau.

The book written by Milevsky which gives a good overview about personal financial planning. The author pointed out that in today’s volatile economic environment and financial markets, investors are constantly reevaluating their attitude to financial risk on virtually a daily basis. However, financial risk approach should not be based on a psychological mindset based on your temper du jour, but instead on the composition of your entire personal balance sheet. The broadly defined investment account is no longer a retirement income supplement or a part-time hobby but the means by which an investor will be able to finance the and support the last 20 or 30 years of her life.

In the book, Milevsky drafted out the way to help manage and grow an investor’s nest egg so that it can eventually be converted and allocated into a pension. The ultimate goal is retirement income planning by using the unique nature and composition of your human capital.

Milevsky then went on by summarizing the unique financial risks that retirees have to face such as longevity risk, unique inflation risk and particular type of financial market risk (sequence of returns). Then he suggested various strategies to deal with those risks.

One interesting idea of Milevsky book is to incorporate human capital into the personal balance sheet. The traditional accounting measures of personal financial net worth and equity, which is computed as the value of assets minus the value of liability. However, Milevsky argued that the single most precious asset on a young person’s financial balance sheet is the present value of all the salary, wages, and income he will earn in his working life. The greater your income prospects, the greater your human capital. The balance sheet should include human capital along with tangible assets to truly reflect the value of a person. As a person ages, she converts human capital into financial capital. Individuals who expect to receive little or no income from a defined benefit pension plan must be even more careful to manage that conversion in order to secure a smooth income stream over their entire life cycle.

The author also stressed the importance of diversification over space and time. An investor should have exposure to bonds, (domestic) stocks, international stocks and alternative asset classes altogether. Human capital’s riskiness should be incorporated into all investment decisions. Depending on the job riskiness, it can be considered as a stock or a bond. An investor can afford to take more diversified investment risk when she is saving for retirement because the investment in human capital may behave more like a bond than a stock. Also, over long time horizons, the probabilities favor investing in stocks.

Milevsky also pointed out another important factor which should be taken into account for personal financial planning: Personal inflation and retirement cost of living. Personal cost of living and the population inflation rate should be distinguished. The inflation rate is likely higher for retired people because they spend their money on goods and services that tend to appreciate at a higher rate over time.

One important point stated in the book is that when you accumulate wealth, and invest for the long run, the exact sequence of investment returns does not matter (with buy-and-hold strategy – no cash flow goes in or out). But when withdrawing money, the sequence of investment returns counts as you can earn a positive average return but still end up exhausting your portfolio early in retirement. Thus, in retirement, the fundamental axiom of modern portfolio theory and current investment management that investments can be ranked solely on the basis of their mean return and variance no longer applies.

Milevsky defined longevity risk as the inability to precisely know how long we are going to live and spend in retirement falls under the label of “longevity risk. If there is a downward shock and your mortality rate declines, and you live longer, you face the risk that your nest egg will not suffice or provide enough income to last for the rest of an investor’s life.

Then Milevsky presented a solution to eliminate that risk - annuities are personal pensions. Annuity is not only an invaluable hedging tool against longevity risk, provide a mechanism for pooling, sharing, and hedging longevity risk over a large population, which leads to a higher yield for annuitants but also provide stable and predictable income that is not subject to vagaries of the stock market

The author concluded the book by pointing out the importance of product allocation for retirement phase. He argued that at retirement one should strive to create a diversified portfolio of products that protect against various retirement risks and make sure to allocate a portion of the money to some sort of annuity instrument, whether fixed or variable, immediate or deferred to get some mortality credits. In the retirement income phase, product allocation is the much more important than asset allocation. Product allocation means the decision of how much of your retirement income should come from conventional financial instruments, such as mutual funds or exchange traded funds, and how much should be generated by pension-like products, such as life annuities, variable annuities, and other guaranteed insurance products. Retirement priorities will be assessed to select optimal retirement product along the frontier. A guiding concept should be the economic trade-off that is implicit within any selected product allocation: security for oneself versus security for one’s heirs. In most cases retirees will not be able to finance a sustainable retirement income with only one or two traditional product classes. All three product categories – income annuities, mutual funds, and variable annuities with embedded guarantees mixed and matched in various combinations are required to maximize one’s retirement sustainability quotient.

At the same time, Professor Pfau is doing a line of comprehensive research about pension and capital asset allocation. He applied the method of historical and Monte Carlo simulation first used in retirement planning by John Ameriks, Robert Veres, and Mark J. Warshawsky (2001) and made popular by Cooley, Hubbard, and Walz (2003). Professor Pfau found out some interesting and ground breaking results such as the failure of the 4% withdrawal rate rule and the importance of international diversification in capital asset allocation. What professor Pfau found also showed that there are many potential aspects in retirement planning that need further exploration.

Research questions:

The book of Milevsky provides a broad picture and a good framework for retirement planning research while the articles of Professor Pfau showed me some issues that need more attention. I started to get interested in the following research questions:

1) The role of annuity in the decomposition (spending) phase of the retirement scheme need further study (e.g. the difference between male and female, the combination of annuity and other financial instruments, etc.). There are quite a lot of researches about the development of annuity markets. In my research, I will assume the existence of a well-functioned annuity market and will look at the issue from the investor’s point of view and find a way to optimize his use of different kind of annuities.

2) How to test the applicability and usefulness of some techniques and financial instruments using in portfolio management and personal financial planning such as “bucket of money” and inflation indexed bonds. (In his book, Milevsky rejected the role of bucket of money in retirement planning but is it really useless? )

3) How to combine the phrases (accumulation and spending) as a whole to maximize the person’s utility, i.e. life cycle asset allocation ?

During my research period, I will try to find the answers to those questions.

Data:

Data will be obtained from various sources, e.g. www.globalfinancialdata.com; http://www.who.int/en/ ; OECD Insurance statics, National Association of Insurance Commissioners, etc. As I would like to use the historical and Monte Carlo simulation, I will use data of developed courtiers which has a long history of financial markets and pension instruments.

Methodology:

Similar to the research of Milevsky and my supervisor, my research will apply Monte Carlo and historical simulation models with minor modifications to deal with serial correlation, mean reversion, etc.

Research schedule:

I am enclosing the tentative research plan herewith. I plan to ask for the extension as I envision that it is not realistic to finish the research in 14 months. In general, I am going to have 14 months for research only and 2 months for summarizing and preparing for the defense of the thesis. Along side with doing research, I would like to seat for the CFA exams which are good complements for doing research in the financial field.

Time	Tasks	Remarks
Jul-11	Finish research proposal
	Literature Review - Annuity
		1st month for Research
Aug-11	Intensive research work - Continue literature review	Summer Vacation
		2nd month for research
Sep-11	Intensive research work - Continue literature review	Summer Vacation
	CFA Level 2 application
	Start revising for CFA
		3rd month for research
Oct-11	Intensive research work - Start running models
	CFA Level 2 Group Formation
		4th month for research
Nov-11	Intensive research work
		5th month for research
Dec-11	Intensive research work
		6th month for research
Jan-12	Intensive research work
		7th month for research
Feb-12	Advanced QE	Winter Vacation
	Intensive revision for CFA Exam Level 2 - Self Study
Mar-12	Intensive revision for CFA Exam Level 2 - Self Study	Winter Vacation
Apr-12	Intensive revision for CFA Exam Level 2 - Group Work
	New Alien Card Application	From April 24th
May-12	Intensive revision for CFA Exam Level 2 - Group Work
Jun-12	CFA Level 2 exam date - Self Study
	Back to research
		8th month for research
Jul-12	Intensive research work
	Application for study period extension in GRIPS
		9th month for research
Aug-12	Intensive research work	Summer Vacation
		10th month for research
Sep-12	Intensive research work	Summer Vacation
	CFA Level 3 application
	VISA Application	End of September
		10th month for research
Oct-12	Intensive research work
	CFA Level 3 Group Formation
		11th month for research
Nov-12	Intensive research work
		12th month for research
Dec-12	Intensive research work
		13th month for research
Jan-13	Intensive research work	Have to finish writing at least 3 articles by the end of January 2013
		14th month for research
Feb-13	Intensive revision for CFA Exam Level 2	Winter Vacation
Mar-13	Intensive revision for CFA Exam Level 2	Winter Vacation
Apr-13	Intensive revision for CFA Exam Level 2
May-13	Intensive revision for CFA Exam Level 2
Jun-13	CFA Level 2 exam date
	Intensive Writing and Preparing for Thesis defense	1st month for Thesis Compilation
Jul-13	Thesis defense	End of July 2013 (30th or 31st)
		2nd month for Thesis Compilation
Aug-13	Thesis revision for submission
		3rd month for Thesis Compilation
Sep-13	Thesis submission