Strategic Asset Allocation in a Continuous Time VAR Model

John Campbell, Luis Viceira (), Jorge Rodriguez and George Chacko

No 4160, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper 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 Paper also shows how to obtain continuous-time parameters that are consistent with discrete-time econometric estimates. The continuous-time solution is the limit of that of Campbell and Viceira and has the property that conservative long-term investors have a large positive intertemporal hedging demand for stocks.

Keywords: Portfolio choice; Time aggregation; Intertemporal hedging; Long-term investing; Recursive utility (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2003-12
New Economics Papers: this item is included in nep-cfn and nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Strategic asset allocation in a continuous-time VAR model (2004)
Working Paper: Strategic Asset Allocation in a Continuous-Time VAR Model (2004)
Working Paper: Strategic Asset Allocation in a Continuous-Time VAR Model (2003)
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