Strategic Asset Allocation, Asset Price Dynamics, and the Business Cycle

Ivan Jaccard

No 574, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: The main contribution of this work is to provide a dynamic general equilibrium model of asset allocation, allowing to reconcile economic theory with several puzzling contradictions recently pointed out in the literature: (i) the asset allocation puzzle, (ii) the observed time-variation in aggregate portfolio holdings, and (iii) the occurrence of twin peaks in equity and house prices. In this approach, compared to the existing literature, the main difference stems from the fact that, in addition to consumption and dividends, both prices and portfolio decisions are allowed to be endogenously determined within a general equilibrium framework. Secondly, real estate is introduced into the analysis, labor supply is allowed to be endogenously determined and macroeconomic shocks are the main source of riskiness.

Keywords: strategic asset allocation; real estate; house prices; business cycle; general equilibrium (search for similar items in EconPapers)
JEL-codes: E20 G11 G12 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
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Working Paper: Strategic Asset Allocation, Asset Price Dynamics, and the Business Cycle (2007)
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