Faculty Advisor

Abraham, Jon P.

Faculty Advisor

Posterro, Barry John

Abstract

The goal of this project is to identify the best spending rule to maximize the purchasing power of a university's endowment, while also maintaining steady yearly spending each year. An endowment is an asset owned that should support an organization in perpetuity; in the case of most universities, it is a large sum of money that is invested in various assets, and managers decide how much to spend each year. Researchers analyze rules' performance in various financial metrics for 1,000 economic scenarios designed to replicate annual returns earned by endowments over a 50-year period. The results of this analysis suggest that universities should calculate yearly spending from their endowment using the recursive moving average spending rule, a blend of the hybrid and moving average rules.

Publisher

Worcester Polytechnic Institute

Date Accepted

2020-04-27

Major

Actuarial Mathematics

Project Type

Major Qualifying Project

Accessibility

Unrestricted

Advisor Department

Mathematical Sciences

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