This paper analyzes optimal portfolio decisions of long-horizon investors with undiversifiable labor income risk and … unambiguously larger for employed investors than for retired investors when labor income risk is uncorrelated with stock return risk … income risk on savings and portfolio choice and finds that, when labor income risk is independent of stock market risk, a …

-cycle (or target date) funds. We find that life-cycle funds designed to match the risk tolerance and investment horizon of … investors have small welfare costs. All other choices, including life-cycle funds which do not match investors' risk tolerance …

Conventional wisdom holds that conservative investors should avoid exposure to foreign currency risk. Even if they hold … risk can be hedged by holding foreign currency if the domestic currency tends to depreciate when the domestic real interest … rate falls, as implied by the theory of uncovered interest parity. Empirically this effect is important and can lead …

for stocks under stochastic volatility varies strongly with the investor's coefficient of relative risk aversion, but only … returns and investors have coefficients of relative risk aversion larger than one. The absolute size of this demand increases … hedging demands by long-term, risk averse investors. A comparative statics exercise shows that the size of hedging demands is …

be attractive to risk-minimizing global equity investors despite their low average returns. The risk-minimizing currency … little evidence that risk-minimizing investors should adjust their currency positions in response to movements in interest …

depends on the importance of real interest rate risk relative to other sources of risk. We extend the analysis to consider …

long-term bonds has both a myopic component and an intertemporal hedging component. As risk aversion increases, the myopic … component shrinks to zero but the hedging component does not. An infinitely risk-averse investor who is infinitely unwilling to …, and the possibility of investment in equities. We find that when indexed bonds are not available, inflation risk leads …

intertemporal hedging motives greatly increase, and may even double, the average demand for stocks by investors whose risk …

increase in the cross-country correlations of cash flow shocks raises the risk of a globally diversified portfolio at all … risk at long horizons and does not diminish the benefits of global portfolio diversification to long-term investors …