We implement a long-horizon static and dynamic portfolio allocation involving a risk-free and a risky asset. This model … estimates to account for parameter uncertainty. We find that for most European countries the dividend-price ratio and inflation … the long-horizon allocation. Parameter uncertainty plays a second-order role, dominated by strong variation in the dynamic …

of utility and risk. This is a rather general pattern. The modern portfolio theory of Markowitz (1959) and the capital …Utility and risk are two often competing measurements on the investment success. We show that efficient trade … market pricing model Sharpe (1964), are special cases of our general framework when the risk measure is taken to be the …