Dynamic asset allocation and latent variables

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Dynamic asset allocation and latent variables

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dc.contributor.author Sørensen, Carsten en_US
dc.contributor.author Trolle, Anders Bjerre en_US
dc.date.accessioned 2009-02-04T10:26:15Z
dc.date.available 2009-02-04T10:26:15Z
dc.date.issued 2004-12-27T00:00:00Z en_US
dc.identifier.isbn 8790705874 en_US
dc.identifier.uri http://hdl.handle.net/10398/7151
dc.description.abstract We derive an explicit solution to the portfolio problem of a power utility investor with preferences for wealth at a ¯nite investment horizon. The investor can invest in assets with return dynamics described as part of a general multivariate model. The modeling framework encompasses discrete-time VAR-models where some of the state-variables (e.g. expected excess returns) may not be directly observable. A realistic multivariate model is estimated and applied to analyze the portfolio implications of investment horizon and return predictability when real interest rates and expected excess returns on stock and bonds are not directly observed but must be estimated as part of the problem faced by the investor. The solution exhibits small variability in portfolio allocations over time compared to the case when excess returns are assumed observable. JEL Classification: G11 Keywords: Portfolio choice, predictability, VAR, unobserved state-variables, hedging demands en_US
dc.format.extent 54 s. en_US
dc.language eng en_US
dc.relation.ispartofseries Working paper;2004-008 en_US
dc.subject.other kep en_US
dc.title Dynamic asset allocation and latent variables en_US
dc.type wp en_US
dc.accessionstatus modt04dec27 miel en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Institut for Finansiering en_US
dc.contributor.departmentshort FI en_US
dc.contributor.departmentuk Department of Finance en_US
dc.contributor.departmentukshort FI en_US
dc.idnumber 8790705874 en_US
dc.publisher.city København en_US
dc.publisher.year 2004 en_US


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