We extend the VAR based intertemporal asset allocation approach from Campbell et al. (2003) to the case where the VAR parameter estimates are adjusted for small-sample bias. We apply the analytical bias formula from Pope (1990) using both Campbell et al.'s dataset, and an extended dataset with...

We extend the VAR based intertemporal asset allocation approach from Campbell et al. (2003) to the case where the VAR parameter estimates are adjusted for small-sample bias. We apply the analytical bias formula from Pope (1990) using both Campbell et al.'s dataset, and an extended dataset with...

Within a VAR based intertemporal asset allocation model we explore the effects on return predictability and optimal asset allocation of adjusting VAR parameter estimates for small-sample bias. We apply a simple and easy-to-use analytical bias formula instead of bootstrap or Monte Carlo...

Vector-autoregressive models are used to decompose housing returns in 18 OECD countries into cash ow (rent) news and discount rate (return) news over the period 1970-2011. For the majority of countries news about future returns is the main driver, and both real interest rates and risk-premia...

The consumption-based asset pricing model with constant relative risk aversion explains the size and value premiums in US data over the period 1929 to 2014. The timing convention used for consumption is crucial for this result. The model matches the cross-sectional variation in mean returns on...

We use a vector-autoregression, with parameter estimates corrected for small-sample bias, to decompose US and German unexpected bond returns into three 'news' components: news about future inflation, news about future real interest rates, and news about future excess bond returns (term premia)....

Building on the framework from Cochrane (1992), we construct a bootstrap test for rational stock price bubbles that does not require a detailed specification of an underlying equilibrium model. The test makes use of the fact that if there are no bubbles, the variance of the price-dividend ratio...

US and UK stock returns are highly positively correlated over the period 1918-1999. Using VAR-based variance decompositions, we investigate the nature of this comovement. Excess return innovations are decomposed into news about future dividends, real interest rates, and excess returns. We find...

On an international post World War II dataset, we use an iterated GMM procedure to estimate and test the Campbell and Cochrane (1999) habit formation model with a time-varying risk-free rate. In addition, we analyze the predictive power of the surplus consumption ratio for future stock and bond...

While Eugene Fama has repeatedly expressed his discontent with the notion of an 'irrational bubble', he has never publicly expressed his opinion on 'rational bubbles'. On empirical grounds Fama rejects bubbles by referring to the lack of reliable evidence that price declines are predictable...