This paper solves the dynamic asset allocation problem under stock return predictability based on the dividend price ratio with regime shifts and parameter uncertainty in a fully Bayesian framework. Intertemporal hedging demands are simultaneously induced by predictability, regime shifts,...

We develop a life-cycle model with optimal consumption, portfolio choice, and flexible work hours for households with loss-framing preferences giving them disutility if they experience losses from stock investments. Structural estimation using U.S. data shows that the model tracks the empirical...

The solution to dynamic portfolio choice models can be formulated in terms of a value function by the Bellman principle of optimality, which reduces the multi-period optimal policy choice problem to a sequence of one-period maximization problems. For two adjacent periods, economists compute the...

In this paper, we investigate the parallelization efficiency of the discrete time dynamic programming approach to solve dynamic portfolio choice models over the life cycle. This approach suffers from the so-called curse of dimensionality. That is, the time-to-result grows exponentially in the...

This paper incorporates two empirically-grounded insights into a dynamic life cycle portfolio choice model: the fact that investors forego the opportunity to accumulate job-specific skills when they spend time managing their own money, and the observation that efficiency in financial decision...