This paper reassesses, at the light of economic and financial theory, the well-documented recent evolution of the euro area public debt and equity markets. Doing so leads to associating the EMU and the single market with the changes in fundamentals and financial integration with convergence in...

We evaluate how deviations from normality may affect the allocation of assets. A Taylor expansion of expected utility allows us to focus on certain moments and to compute numerically the optimal portfolio allocation. A decisive advantage of our approach is that it remains operational even if a...

This study explores how innate learning ability changes portfolio selection decision-making in a continuous-time framework. We re-solve Samuelson-Merton¡¦s portfolio choice problem framed in a fixed investment opportunity set for an individual with a learning ability. In contrast to...

This paper investigates the diversification contribution of several commodities to a portfolio of traditional assets from the perspective of a euro investor. The approach applied in our analysis has high informational content as it differentiates between the sources of the diversification...

Asset managers are often given the task of restricting their activity by keeping both the value at risk (VaR) and the tracking error volatility (TEV) under control. However, these constraints may be impossible to satisfy simultaneously because VaR is independent of the benchmark portfolio. The...

We introduce an asset-allocation framework based on the active control of the value-at- risk of the portfolio. Within this framework, we compare two paradigms for making the allocation using neural networks. The first one uses the network to make a forecast of asset behavior, in conjunction with...

We take into account: (i) a set of stochastic investment opportunities, (ii) a set of risky assets, (iii) a stochastic riskless interest rate, (iv) stochastic labour incomes, and (v) HARA preferences. Without specifying any particular functional form for drifts and diffusions of all the...

In models of decision making under uncertainty we often are faced with the problem of representing the uncertainties in a form suitable for quantitative models. If the uncertainties are expressed in terms of multivariate continuous distributions, or a discrete distribution with far too many...

An investor with the ability to assess the prospective return and risk structure of the global capital markets can construct portfolios that, over time, will not only outperform actively or passively managed domestic asset portfolios but will also outperform passively managed global portfolios....

We address the empirical implementation of the static asset allocation problem by developing a forward-looking approach that uses information from market option prices. To this end, we extract constant maturity S&P 500 implied distributions and transform them to the corresponding risk-adjusted...