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A multivariate model of strategic asset allocation

2013; World Scientific; Linguagem: Inglês

10.1142/9789814417358_0039

2010-1732

John Y. Campbell, Yeung Lewis Chanb, M. Viceira,

Market Dynamics and Volatility

World Scientific Handbook in Financial Economics SeriesHandbook of the Fundamentals of Financial Decision Making, pp. 809-848 (2013) No AccessChapter 39: A multivariate model of strategic asset allocationJohn Y. Campbell, Yeung Lewis Chanb and M. ViceiraJohn Y. CampbellDepartment of Economics, Hanard University, Littauer Center 213, 1875 Cambridge Street, Cambridge, MA 02138, USANational Bureau ol Economic Research, Cambridge, MA 02138, USACorresponding author. Department of Economics, Littauer Center 213, Harvard University, 1875 Cambridge Street, Cambridge, MA 02138, USA. Fax: + 1-617-495-8570. E-mail address: [email protected] (J.Y. Campbell)., Yeung Lewis ChanbSchool of Business and Management, Hong Kong University of Science and Technology, Kowloon, Hong Kong and M. ViceiraHarvard Business School, Harvard University, Boston, MA 02163, USANational Bureau ol Economic Research, Cambridge, MA 02138, USACentre for Economic Policy Research, London EC1 V7 RR, UKhttps://doi.org/10.1142/9789814417358_0039Cited by:1 PreviousNext AboutSectionsPDF/EPUB ToolsAdd to favoritesDownload CitationsTrack CitationsRecommend to Library ShareShare onFacebookTwitterLinked InRedditEmail 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. Campbell acknowledges the financial support of the National Science Foundation, Chan the financial support of the Hong Kong RGC Competitive Earmarked Research Grant (HKUST 6065/0lH), and Viceira the financial support of the Division of Research of the Harvard Business School. We are grateful for helpful comments and suggestions by Ludger Hentschel, Anthony Lynch, an anonymous referee, and seminar participants at Harvard, the 1999 Intertemporal Asset Pricing Conference hosted by the Centre Interuniversitaire de Recherche en Analyse des Organizations (CYRANO) of Montreal, the 2000 WFA Meetings, and the Kellogg School of Management at Northwestern University. Josh White provided invaluable research assistance.JEL: G12 FiguresReferencesRelatedDetailsCited By 1Risk attitudes and household consumption behavior: Evidence from ChinaXin Xie, Zefeng Tong and Shulin Xu6 September 2022 | Frontiers in Public Health, Vol. 10 Handbook of the Fundamentals of Financial Decision MakingMetrics History Keywordslntertemporal hedging demandPortfolio choicePredictabilityStrategic asset allocationPDF download