Please use this identifier to cite or link to this item: http://hdl.handle.net/1783.1/787

A multivariate model of strategic asset allocation

Authors Campbell, John Y.
Chan, Yeung Lewis
Viceira, Luis M.
Issue Date 2003
Source Journal of financial economics, v. 67, (1), 2003, JAN, p. 41-80
Summary 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 intlation-indexed bonds greatly increase the utility of conservative investors. (C) 2002 Elsevier Science B.V. All rights reserved.
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ISSN 0304-405X
Language English
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