In this paper we develop tests for the hypothesis that a series (observed in discrete time) is generated by a diffusion process and discuss the results of these tests for several exchange rates and stock market indices. The tests of this hypothesis that have been proposed up to now in literature...

We examine incomplete annuity menus and background risk as possible drivers of divergence from full annuitization. Contrary to what is often suggested in the literature, we find that full annuitization remains optimal if saving is possible after retirement. This holds irrespective of whether...

We reexamine empirical evidence on strategic risk-taking behavior by mutual fund managers.Several studies suggest that fund performance in the first semester of a year influences risk-taking in the second semester.However, we show that previous empirical studies implicitly assume that...

We study the optimal consumption and portfolio choice problem over an individual's life-cycle taking into account annuity risk at retirement. Optimally, the investor allocates wealth at retirement to nominal, inflation-linked, and variable annuities and conditions this choice on the state of the...

This paper tests whether hedging currency risk improves the performance of international stock portfolios. We use a generalized performance measure which allows for investor-dependencies such as different utility functions and the presence of nontraded risks. In addition we show that an...

This paper generalizes the notion of mean-variance spanning as de- ned in the seminal paper of Huberman & Kandel (1987) in three di- mensions.It is shown how regression techniques can be used to test for spanning for more general classes of utility functions, in case some as- sets are nontraded,...

This study reconsiders the determinants of flows into US growth funds, focusing in particular on the dynamics of the impact of past performance on flows.We model the flow-performance relationship at the monthly frequency, allowing for dependence of the sensitivity of flows to past performance on...

The riskless nature in real terms of inflation-linked bonds has led to the conclusion that inflation-linked bonds should constitute a substantial part of the optimal investment portfolio of long-term investors.This conclusion is reached in models where investors do not receive labor income...

We analyze the effect of health cost risk on optimal annuity demand and consumption/savings decisions. Many retirees are exposed to sizeable out-of-pocket medical expenses, while annuities potentially impair the ability to get liquidity to cover these costs and smooth consumption. We find that...