Strategic Asset Allocation in a Continuous-Time VAR Model

John Y. Campbell (), George Chacko, Jorge Rodriguez and Luis M. Viciera
Authors registered in the RePEc Author Service: Luis M. Viceira ()

No 9547, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This note derives an approximate solution to a continuous-time intertemporal portfolio and consumption choice problem. The problem is the continuous-time equivalent of the discrete-time problem studied by Campbell and Viceira (1999), in which the expected excess return on a risky asset follows an AR(1)process, while the riskless interest rate is constant. The note also shows how to obtain continuous-time parameters that are consistent with discrete-time econometric estimates. The continuous-time solution is numerically close to that of Campbell and Viceira and has the property that conservative long-term investors have a large positive intertemporal hedging demand for stocks.

JEL-codes: G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn
Date: 2003-03
Note: EFG ME AP
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Related works:
Working Paper: Strategic Asset Allocation in a Continuous Time VAR Model (2003)
Journal Article: Strategic asset allocation in a continuous-time VAR model (2004)
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