Showing 1 - 10 of 11
We calculate optimal portfolio choices for a long-horizon, risk-averse investor who diversifies amongEuropean stocks, bonds, real estate, and cash, when excess asset returns are predictable. Simulations areperformed for scenarios involving different risk aversion levels, horizons, and...
Persistent link: https://www.econbiz.de/10005870164
This paper examines a continuous-time intertemporal consumption and portfolio choice problem foran ambiguity-averse investor with multiple priors when the expected return of a risky asset isunobservable and follows a hidden Markov chain. The investor’s beliefs over investmentopportunities are...
Persistent link: https://www.econbiz.de/10005870701
The 2007-2008 financial crises has made it painfully obvious that markets may quickly turn illiquid.Moreover, recent experience has shown that distress and lack of active trading can jump “around”between seemingly unconnected parts of the financial system contributing to transforming...
Persistent link: https://www.econbiz.de/10005870697
Applying the framework of conditional event studies shows that equity issues reveal managers‟private information about stock mispricing, which investors only partially discount into stockprices at the seasoned equity offering (SEO) announcement date. Negative abnormal returnsoccur as prices...
Persistent link: https://www.econbiz.de/10005870708
We use multivariate regime switching vector autoregressive models to characterize the time-varyinglinkages among the Irish stock market, one of the top world performers of the 1990s, and the US andUK stock markets. We ¯nd that two regimes, characterized as bear and bull states, are required...
Persistent link: https://www.econbiz.de/10005869997
A growing number of studies in finance decompose multi-period buy-and-hold portfolioreturns into a series of single period returns. The method used to decomposethese returns is important because researchers use them in tests of asset pricing modelsand market efficiency and in evaluating the...
Persistent link: https://www.econbiz.de/10005869998
We address one interesting case — the predictability of excess US asset returns from macroeconomic factors within a flexible regime switching VAR framework — in which the presence of regimes may lead to superior forecasting performance from forecast combinations. After having documented that...
Persistent link: https://www.econbiz.de/10005870160
This paper studies asset allocation decisions in the presence of regime switching in asset returns. Wefind evidence that four separate regimes - characterized as crash, slow growth, bull and recovery states- are required to capture the joint distribution of stock and bond returns. Optimal asset...
Persistent link: https://www.econbiz.de/10005870161
This study explores the information content of HML and SMB by linking the Fama-French factors toshocks in the state variables which predict future investment opportunities. It shows that the HMLfactor contains information about shocks to default spread. Moreover, the Fama-French modelexplains...
Persistent link: https://www.econbiz.de/10005870637
Welfare gains to long-horizon investors may derive from time diversification that exploits non-zerointertemporal return correlations associated with predictable returns. Real estate may thus become moredesirable if its returns are negatively serially correlated. While it could be important for...
Persistent link: https://www.econbiz.de/10005870699