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Strategic Asset Allocation in a Continuous-Time VAR Model

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

Scholarly Articles from Harvard University Department of Economics

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 (Q. J. Econ. 114 (1999) 433) 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.

Date: 2004
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Published in Journal of Economic Dynamics and Control

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