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This paper examines popular advice on portfolio allocation among cash, bonds, and stocks. It documents that this advice is inconsistent with the mutual-fund separation theorem, which states that all investors should hold the same composition of risky assets. In contrast to the theorem, popular...
Persistent link: https://www.econbiz.de/10012474054
This paper examines the optimal allocation of risk in an overlapping-generations economy. It compares the allocation of … risk the economy reaches naturally to the allocation that would be reached if generations behind a Rawlsian 'veil of … ignorance' could share risk with one another through complete Arrow-Debreu contingent-claims markets. The paper then examines …
Persistent link: https://www.econbiz.de/10012470454
depends on the concentration of these aggregate shocks; it follows that one cannot estimate the degree of risk aversion from …
Persistent link: https://www.econbiz.de/10012477289
appropriate measure of an asset's risk is the covariance of the asset's return with the market return. The consumption CAPM, on … the other hand, implies that a better measure of risk is the covariance with aggregate consumption growth. We examine a …
Persistent link: https://www.econbiz.de/10012477690
The macroeconomic analysis of fiscal policy is usually based on one of two canonical models--the Barro-Ramsey model of infinitely-lived families or the Diamond-Samuelson model of overlapping generations. This paper argues that neither model is satisfactory and suggests an alternative. In the...
Persistent link: https://www.econbiz.de/10012471204
Fluctuations in real GNP have traditionally been viewed as transitory deviations from a deterministic time trend. The purpose of this paper is to review some of the recent developments that have led to a new view of output fluctuations and then to provide some additional evidence. Using post-war...
Persistent link: https://www.econbiz.de/10012476900
In this paper, we re-examine the standard analysis of the short-run effect of a personal tax cut. If consumer spending generates more money demand than other components of GNP, then tax cuts may, by increasing the demand for money, depress aggregate demand. We examine a variety of evidence and...
Persistent link: https://www.econbiz.de/10012477645
One important channel through which real interest rates affect aggregate demand is consumer expenditure on durable goods. This paper examines empirically the link between interest rates and consumer durables. Solving for the decision rule relating income and interest rates to consumer demand is...
Persistent link: https://www.econbiz.de/10012477953
Modern neoclassical theories of the business cycle posit that aggregate fluctuations in consumption and employment are the consequence of dynamic optimizing behavior by economic agents who face no quantity constraint. In this paper, we estimate an explicit model :f this type. In particular, we...
Persistent link: https://www.econbiz.de/10012478210
This paper presents a model of a multi-sector economy in which each sector is characterized by a different type of wage or price stickiness. The various sectors experience the same exogenous shocks and have the same money supply. The analysis shows demand shocks pose no serious problems for...
Persistent link: https://www.econbiz.de/10012478238