A Multivariate Model of Strategic Asset Allocation

Yeung Lewis Chan, Luis Viceira () and John Campbell

Scholarly Articles from Harvard University Department of Economics

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.

Date: 2003
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Published in Journal of Financial Economics

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Related works:
Chapter: A multivariate model of strategic asset allocation (2013)
Journal Article: 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)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:3163263

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