Zeta Publications

Grable, J. E., & Chatterjee, S. (2014). Reducing wealth volatility: The value of financial advice as measured by zeta. Journal of Financial Planning, 27(8), 45-51.

  • Gamma, as a financial planning term, refers to the additional value obtained by a client from making more informed financial planning decisions. Essentially, this is the value added by financial planners beyond the management of portfolio assets.
  • This paper introduced a similar value measure called zeta (ζ). Zeta, as defined here, is a function of alpha and gamma and represents the value of advice in reducing wealth volatility provided by a financial planner.
  • This study estimated zeta results for clients who met with a financial planner prior to the Great Recession. Respondents who had previously met with a financial planner experienced less wealth volatility, on a risk-adjusted basis, than expected. Results suggest that financial planners add value that is quantifiable and meaningful in terms of reducing wealth volatility over time.

JFP Grable and Chatterjee Zeta

Grable, J. E., & Chatterjee, S. (2014). Zeta estimates of wealth volatility and financial planning horizon. Ewha Journal of Social Science, 5-24.

  • The intention of this study was to document how closely households follow normative descriptions of financial behavior in relation to their financial planning horizon. Modern Portfolio Theory predicts that households, in general, exhibit risk aversion. Aversion to wealth volatility should correspondingly be highest among those households with the shortest planning horizons. This study estimated percentage changes in wealth and wealth volatility over time categorized by financial planning horizon using data from the 2002 through 2010 waves of Health and Retirement Study. Modigliani ratios were computed for the entire population and by planning horizon. Zeta estimates were made by calculating the difference between the Modigliani ratios for each planning horizon and the ratio for the short-term horizon. Contrary to the conceptualized relationship between planning horizon and financial wealth volatility, results from this study show that respondents with the shortest financial planning horizons experienced lower risk-adjusted returns and greater wealth volatility. The findings of this study underscore an unmet and perhaps unrealized need for professionally provided financial planning.

Grable and Chatterjee Zeta II