We show that the net corporate payout yield predicts both the stock market index and house prices and that the log home rent-price ratio predicts both house prices and labor income growth. We incorporate the predictability in a rich life-cycle model of household decisions involving consumption...

In a calibrated consumption-portfolio model with stock, housing, and labor income predictability, we disentangle the welfare effects of skill and luck. Skilled investors are able to take advantage of all sources of predictability, whereas unskilled investors ignore predictability. Lucky...

Three concepts: stochastic discount factors, multi-beta pricing and mean-variance efficiency, are at the core of modern empirical asset pricing. This chapter reviews these paradigms and the relations among them, concentrating on conditional asset-pricing models where lagged variables serve as...

In a nationally-representative sample, we predict retirement savings using survey-based elicitations of exponential-growth bias (EGB) and present bias (PB). We find that EGB, the tendency to neglect compounding, and PB, the tendency to value the present over the future, are highly significant...

Using a modified DCC-MIDAS specification that allows the long-term correlation component to be a function of multiple explanatory variables, we show that the stock-bond correlation in the US, the UK, Germany, France, and Italy is mainly driven by inflation and interest rate expectations as well...

This paper proposes a novel approach to the combination of conditional covariance matrix forecasts based on the use of the Generalized Method of Moments (GMM). It is shown how the procedure can be generalized to deal with large dimensional systems by means of a two-step strategy. The finite...

Under the Basel II Accord, banks and other Authorized Deposit-taking Institutions (ADIs) have to communicate their daily risk estimates to the monetary authorities at the beginning of the trading day, using a variety of Value-at-Risk (VaR) models to measure risk. Sometimes the risk estimates...

We implement a long-horizon static and dynamic portfolio allocation involving a risk-free and a risky asset. This model is calibrated at a quarterly frequency for ten European countries. We also use maximum-likelihood estimates and Bayesian estimates to account for parameter uncertainty. We find...

This paper addresses the open debate about the effectiveness and practical relevance of highfrequency (HF) data in portfolio allocation. Our results demonstrate that when used with proper econometric models, HF data offers gains over daily data and more importantly these gains are maintained...