%0 Journal Article %A Anthony L. Loviscek %T Should Preferred Stock Funds Be Included in Mutual
Fund Portfolios? %D 2017 %R 10.3905/jwm.2017.20.1.083 %J The Journal of Wealth Management %P 83-96 %V 20 %N 1 %X Should preferred stock funds, despite their lack of attention from Wall Street, academia, and the financial media, be preferred in mutual fund portfolios? To address this question, we construct mean–variance-efficient portfolios from U.S.-centric mutual funds that represent common stocks, Treasury bills, Treasury bonds, corporate bonds, real estate investment trusts, and preferred stocks to determine whether a preferred stock fund meets the standards for inclusion in mutual fund portfolios. We also conduct robustness checks on the results and perform out-of-sample tests on portfolio performance with and without the preferred fund. Overall, the evidence indicates that a preferred stock fund allocation in the range of 5%–15% can reduce portfolio risk while at least preserving portfolio return, providing a cushion for portfolio managers of balanced funds and for income-seeking investors.TOPICS: Mutual funds/passive investing/indexing, portfolio construction, statistical methods, performance measurement %U https://jwm.pm-research.com/content/iijwealthmgmt/20/1/83.full.pdf