A multivariate model of strategic asset allocation

John Campbell, Yeung Lewis Chanb and M. Viceira

Chapter 39 in Handbook of the Fundamentals of Financial Decision Making:In 2 Parts, 2013, pp 809-848 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We develop an approximate solution method for the optimal consumption and portfolio choice problem of an infinitely long-lived investor with Epstein–Zin utility who faces a set of asset returns described by a vector autoregression in returns and state variables. Empirical estimates in long-run annual and post-war quarterly U.S. data suggest that the predictability of stock returns greatly increases the optimal demand for stocks. The role of nominal bonds in long-term portfolios depends on the importance of real interest rate risk relative to other sources of risk. Long-term inflation-indexed bonds greatly increase the utility of conservative investors.

Keywords: Financial Decision Making; Asset Pricing; Prospect Theory; Utility Theory; Risk Aversion; Static Portfolio Theory; Stochastic Dominance; Dynamic Modeling; Dynamic Portfolio Theory; Tactical Asset Allocation; Kelly Strategy; Capital Growth (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9789814417358_0039 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9789814417358_0039 (text/html)
Ebook Access is available upon purchase.

Related works:
Journal Article: A multivariate model of strategic asset allocation (2003)
Working Paper: A Multivariate Model of Strategic Asset Allocation (2003)
Working Paper: A Multivariate Model of Strategic Asset Allocation (2001)
Working Paper: A Multivariate Model of Strategic Asset Allocation (2001)
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:wsi:wschap:9789814417358_0039

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().