Performance evaluation of mutual funds using factor pricing models is usually distorted by the existence of a volatility anomaly and correlated residuals. By augmenting the Fama-French five-factor model with an active peer benchmark, we eliminate the measurement errors caused by these...

Should long-term investors account for time-variation in model parameters? We develop a time-varying Vector Autoregressive model that can handle time-variation in intercepts, slopes, volatility and correlation, the leverage effect in volatility and fat tails. Long-term investors should take...

This paper proposes a structural approach to long-horizon asset allocation. In particular, the investor draws inferences about asset returns from a vector autoregression (VAR) with economic restrictions on the intercept, slope, and covariance matrix implied by the long-run risk model of Bansal...