Using a modified DCC-MIDAS specification that allows the long-term correlation component to be a function of multiple explanatory variables, we show that the stock-bond correlation in the US, the UK, Germany, France, and Italy is mainly driven by inflation and interest rate expectations as well...

This paper suggests a solution to what has become known as the "private equity premium puzzle" (Moskowitz and Vissing-Jorgensen (2002)). We interpret occupational choice as a dynamic portfolio choice problem of a life-cycle investor facing a liquidity constraint and imperfect information about...

We study the consumption and investment model under time-varying liquidity constraints (TVLC) that are widely used in reality. We first develop a martingale method to analyze the case in which the borrowing limit is specified by the debt-to-income ratio limit and then extend this framework to...

We introduce a model for portfolio selection with an extendable investment universe where the agent faces a trade-off between exploiting existing and exploring for new investment opportunities. An agent with mean-variance preferences starts with an existing investment universe consisting of a...

The maximum diversification has been shown in the literature to depend on the vector of asset volatilities and the inverse of the covariance matrix of the asset return covariance matrix. In practice, these two quantities need to be replaced by their sample statistics. The estimation error...

Overall, 72 subjects invest their endowment in four risky assets. Each com-bination of assets yields the same expected return and variance of returns. Illusion of expertise prevails when one prefers nevertheless the self-selected portfolio. After being randomly assigned to groups of four...

We propose and implement a procedure to optimally hedge climate change risk. First, we construct climate risk indices through textual analysis of newspapers. Second, we present a new approach to compute factor mimicking portfolios to build climate risk hedge portfolios. The new mimicking...

We propose and implement a procedure to optimally hedge climate change risk. First, we construct climate risk indices through textual analysis of newspapers. Second, we present a new approach to compute factor mimicking portfolios to build climate risk hedge portfolios. The new mimicking...

This paper first develops a new approach, which is based on the Nelson-Siegel term structure factor-augmented model, to compute the VaR of bond portfolios. We then applied the model to examine whether information contained on macroeconomic variables and financial shocks can help to explain the...