We investigate whether investors tend to form expectations about different categories of assets in a consistent, similar fashion, or whether an investor would apply different models for forming expectations depending on the classification or characteristics of the assets. We investigate the...

We consider a sovereign wealth fund that invests broadly in the international financial markets. The influx to the fund has stopped. We adopt the life cycle model and demonstrate that the optimal spending rate from the fund is significantly less than the fund's expected real rate of return. The...

We show that the quotient of Levy processes of jump-diffusion type has a fat-taileddistribution. An application is to price theory in economics, with the result that fat tails ariseendogenously from modeling of price change based on an excess demand analysis resulting in aquotient of arbitrarily...

By using their financial reserves efficiently, pension funds can smooth shocks on asset returns, and can thus facilitate intergenerational risk-sharing. In addition to the primary benefit of improved time diversification, this form of risk allocation affords the additional benefit of allowing...

We use stochastic optimal control-dynamic programming (DP) to derive the optimal foreign debt/net worth, consumption/net worth, current account/net worth, and endogenous growth rate in an open economy. Unlike the literature that uses an Intertemporal Budget Constraint (IBC) or the Maximum...

Ambiguous assets are characterized as assets where objective and subjective probabilities of tomorrow's asset-returns are ill-defined or may not exist, e.g., bitcoin, volatility indices or any IPO. Investors may choose to diversify their portfolios of fiat money, stocks and bonds by investing...

This paper suggests a solution to what has become known as the "private equity premium puzzle" (Moskowitz and Vissing-Jorgensen (2002)). We interpret occupational choice as a dynamic portfolio choice problem of a life-cycle investor facing a liquidity constraint and imperfect information about...

The objective of this paper is to combine a real options framework with portfolio optimization techniques and to apply this new framework to investments in the electricity sector. In particular, a real options model is used to assess the adoption decision of particular technologies under...

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...