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The Equity Premium and the Baby Boom
Brooks, Robin - Econometric Society - 2004
This paper explores the quantitative impact of the Baby Boom on stock and bond returns. It constructs a neoclassical growth model with overlapping generations, in which agents make a portfolio decision over risky capital and safe bonds in zero net supply. The model has exogenous technology and...
Persistent link: https://www.econbiz.de/10005328938
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Consumption, Portfolio Policies and Dynamic Equilibrium in the Presence of Preference for Ownership
Ehling, Paul - Econometric Society - 2004
In this article we construct a model in which agents exhibit preference for ownership with respect to a durable (house). Ownership is modeled as a continuous function of debt service normalized by the price of the house. We study the utility optimization problem of an investor not endowed with...
Persistent link: https://www.econbiz.de/10005328956
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The Markovian Dynamics of "Smart Money"
Yang, J-H Steffi - Econometric Society - 2004
I develop a Markov model of samrt money chasing past winning funds while taking into account associated costs. The model also allows market capital entry and exit. The steady-state capital allocations re derived using constant transition probabilities. The results sugget that down side risk is...
Persistent link: https://www.econbiz.de/10005086415
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Ignorance, Fixed Costs, and the Stock Market Participation Puzzle
Naudon, Alberto; Tapia, Matías - Econometric Society - 2004
While the existence of fixed costs in entering asset markets is the leading rationalization of the "participation puzzle" -the fact that most households do not hold stocks, despite the diversification gains and the significant risk-premium involved-, most motivations of these fixed costs are as...
Persistent link: https://www.econbiz.de/10005699623
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Learning the CAPM through Bubbles
Kedar-Levy, Haim - Econometric Society - 2004
Bubbles are generally considered the outcome of investor irrationality or informational asymmetry, both objectionable in efficient markets with rational investors. We introduce an Intertemporal-CAPM with market clearing between high- and low-risk-averse rational investors who learn the CAPM...
Persistent link: https://www.econbiz.de/10005702759
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Currency Substitution, Portfolio Diversification and Money Demand
Freitas, Miguel Lebre de - Econometric Society - 2004
The paper explores the implications of means of payment substitutability and capital mobility on the properties of the money demand, using the Thomas (1985) stochastic dynamic optimising model, where the specific role of money is explicitly accounted for. Extending the model to a case in which...
Persistent link: https://www.econbiz.de/10005328925
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A Life-cycle Model with Housing, Portfolio Allocation, and Mortgage Financing
Nichols, Joseph - Econometric Society - 2004
This paper presents a model developed to explain the life-cycle patterns in both homeownership and portfolio allocation, and the relationship between them, using a model of rational agents. Two key innovations are incorporated into this model. First, housing is explicitly modeled as both a...
Persistent link: https://www.econbiz.de/10005328942
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Uncertainty in Second Moments: Implications for Portfolio Allocation
Cho, David Daewhan - Econometric Society - 2004
second moments can be estimated very accurately. However, time varying volatility and nonnormality of asset returns can lead …/ME sorted portfolios from 1963 to 2001, the loss due to the variance estimation can be shown to be as large as the loss due to … the expected return estimation. Moreover, as the number of assets in the portfolio increases, the loss due to the variance …
Persistent link: https://www.econbiz.de/10005342343
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Optimum Consumption and Portfolio Allocations under Incomplete Information
Roche, Herve - Econometric Society - 2004
We solve in closed form the optimal consumption / portfolio choice problem for the class of isoelastic utility functions under incomplete information about the mean return of the stock price. Our approach consists in converting the original investor's problem into an equivalent program where the...
Persistent link: https://www.econbiz.de/10005129785
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Uncertainty in Second Moments: Implications for Portfolio Allocation
Cho, David Daewhan - Econometric Society - 2004
second moments can be estimated very accurately. However, time varying volatility and nonnormality of asset returns can lead …/ME sorted portfolios from 1963 to 2001, the loss due to the variance estimation can be shown to be as large as the loss due to … the expected return estimation. Moreover, as the number of assets in the portfolio increases, the loss due to the variance …
Persistent link: https://www.econbiz.de/10005130241