RT Journal Article SR Electronic T1 Should Preferred Stock Funds Be Included in Mutual
Fund Portfolios? JF The Journal of Wealth Management FD Institutional Investor Journals SP 83 OP 96 DO 10.3905/jwm.2017.20.1.083 VO 20 IS 1 A1 Anthony L. Loviscek YR 2017 UL https://pm-research.com/content/20/1/83.abstract AB 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