Koijen, Ralph S. J.; Rodríguez, Juan Carlos; Sbuelz, … - In: Management Science 55 (2009) 7, pp. 1199-1213
We study a dynamic asset allocation problem in which stock returns exhibit short-run momentum and long-run mean reversion. We develop a tractable continuous-time model that captures these two predictability features and derive the optimal investment strategy in closed form. The model predicts...