preference parameters. This paper also shows that stochastic variation in volatility produces an optimal intertemporal hedging … market shows that empirically this correlation is negative and large, which implies a negative hedging demand for stocks … hedging demands by long-term, risk averse investors. A comparative statics exercise shows that the size of hedging demands is …

hedging portfolio, which allows them to hedge the dynamic risk. This implies that trading volume of individual assets exhibit … a two-factor structure, and their factor loadings depend on their weights in the hedging portfolio. This allows us to … empirically identify the hedging portfolio using volume data. We then test the two properties of the hedging portfolio: its return …

international diversification is still valuable with regime changes. Currency hedging imparts further benefit. The costs of ignoring … the regimes are small for moderate levels of risk aversion, and the intertemporal hedging demands induced by time …

, but not at long horizons. At horizons of several years, complete hedging not only does not lower return variance, it … apparent causes, and investigates their implications for hedging practice …