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Forecasting Portfolio Balance Using Return Mean, Standard Deviation and Spending

Author

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  • Jeffry Haber
  • Andrew Braunstein

Abstract

This paper develops an integrated formula using return mean, standard deviation and spending to forecast the ending balance of a portfolio. The forecasted ending balances were robust when tested over a variety of time periods, spending percentages, and varying how the spending was calculated. This formula is useful for a variety of stakeholders ¨C for government regulators to see how a change in required spending percentages would affect the long-term viability of institutions, for those institutions in understanding how the standard deviation (as a proxy for volatility) affects the portfolio balance, and for investment committees in understanding the trade-off between return and volatility and the resultant effect on the portfolio, among others.

Suggested Citation

  • Jeffry Haber & Andrew Braunstein, 2016. "Forecasting Portfolio Balance Using Return Mean, Standard Deviation and Spending," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 7(2), pages 98-121, April.
    • Handle: RePEc:jfr:ijfr11:v:7:y:2016:i:2:p:98-121
    DOI: 10.5430/ijfr.v7n2p98
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