EconPapers    
Economics at your fingertips  
 

Long-term Portfolio Allocation Based on Long-term Macro forecasts

Eric Jondeau () and Michael Rockinger
Additional contact information
Michael Rockinger: Swiss Finance Institute, University of Lausanne

Bankers, Markets & Investors, 2015, issue 134, 62-69

Abstract: We first discuss arguments that rebut quantitative portfolio allocation for the long term based on non predictability of asset markets. Next, we find that over long time horizon such as 10 years, macro-economic forecasts of various economic variables outperform in terms of meansquared errors those obtained with purely statistical techniques. We discuss the components needed to model liability returns and empirically demonstrate that a) portfolio allocations taking into account pension fund hedging demand substantially differ from traditional asset allocations that b) in terms of certainty equivalent, there is a large cost if one neglects liabilities. The utility cost of using suboptimal strategies amounts to several percent returns essentially due to deterioration of volatility. The cost of imposing positive weights on asset-liability management allocations is also economically significant.

Keywords: Stock Returns; Predictability; Pension Fund; Portfolio Choice (search for similar items in EconPapers)
JEL-codes: C51 C53 C61 G11 J32 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.revue-banque.fr/article/long-term-portf ... -based-long-term-mac (text/html)
price

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rbq:journl:i:134:p:62-69

Ordering information: This journal article can be ordered from
12 rue du Quatre-Septembre, 75002 PARIS France
http://www.eska.fr

Access Statistics for this article

More articles in Bankers, Markets & Investors from ESKA Publishing
Bibliographic data for series maintained by Marise Urbano ().

 
Page updated 2020-07-03
Handle: RePEc:rbq:journl:i:134:p:62-69