We test whether asymmetric preferences for losses versus gains as in Ang, Chen, and Xing (2006) also affect the pricing of cash flow versus discount rate news as in Campbell and Vuolteenaho (2004). We construct a new four-fold beta decomposition, distinguishing cash flow and discount rate betas...

Deriving an optimal asset allocation for institutional investors hinges crucially on the quality of inputs used in the optimization. If the mean vector and the covariance matrix are known with certainty, the classical mean-variance optimization of Markowitz (1952) produces optimal portfolios....