This paper considers a multivariate t version of the Gaussian dynamic conditional correlation(DCC) model proposed by Engle (2002), and suggests the use of devolatized returnscomputed as returns standardized by realized volatilities rather than by GARCH type volatilityestimates. The t-DCC...

We perform a general equilibrium analysis in a complete markets economy whenthe dividend follows a jump-diffusion process with stochastic volatility. Agents haveCRRA utility, but differ with respect to their degree of risk aversion. The keyoutput of our analysis is the structure of the...

In this paper we perform a general equilibrium analysis when the dividend followsa jump-diffusion process with stochastic volatility, where both the dividend itselfand its volatility can jump. We work in a complete markets economy and assumethat agents have CRRA utility, but can differ with...

Model mis-specification can cause substantial utility losses in portfolio planning.In this paper, we compare two approaches to cope with this problem,robust control and learning. We derive the optimal portfolio strategies and theutility losses due to model mis-specification. Surprisingly,...

This chapter surveys theoretical research on the long-term performanceof xed-mix investment strategies. These self-nancing strategies rebalancethe portfolio over time so as to keep constant the proportionsof wealth invested in various assets. The main result is that wealthcan be grown from...

We derive representations for the stock price drift and volatility in theequilibrium of agents with arbitrary, heterogeneous utility functionsand with the aggregate dividend following an arbitrary Markov diffusion.We introduce a new, intrinsic characteristic of the aggregate dividendprocess that...

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...

This paper considers a multivariate t version of the Gaussian dynamic conditional correlation (DCC) model proposed by Engle (2002), and suggests the use of devolatized returns computed as returns standardized by realized volatilities rather than by GARCH type volatility estimates. The t-DCC...

This paper considers the problem of model uncertainty in the case of multi-asset volatility models and discusses the use of model averaging techniques as a way of dealing with the risk of inadvertently using false models in portfolio management. Evaluation of volatility models is then considered...

Modelling of conditional volatilities and correlations across asset returns is an integral part of portfolio decision making and risk management. Over the past three decades there has been a trend towards increased asset return correlations across markets, a trend which has been accentuated...