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Prospective utility and optimal asset allocation for the UK: 1803-1995

Record type: Article

The equity risk premium has attracted considerable debate and various proposed explanations. We re-examine one approach based on myopic loss aversion, while incorporating time variation in returns distributions. We identify optimal asset allocations across a two-century period for the UK, in the context of a range of plausible investment evaluation periods. We demonstrate that both the frequency of evaluation which achieves indifference between equities and bonds, and the optimal asset allocation profile, vary significantly over time. Although equities dominate for long periods, it is evident that periods of low inflation lead to the prominence of bonds in optimal allocations.

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Citation

McManus, Ian, Ap Gwilym, Owain and Thomas, Stephen (2009) Prospective utility and optimal asset allocation for the UK: 1803-1995 International Journal of Behavioural Accounting and Finance, 1, (2), pp. 95-110.

More information

Published date: January 2009

Identifiers

Local EPrints ID: 36254
URI: http://eprints.soton.ac.uk/id/eprint/36254
PURE UUID: 03cf30d7-22a7-4ced-9d08-d96c29aee466

Catalogue record

Date deposited: 19 May 2006
Last modified: 17 Jul 2017 15:45

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Contributors

Author: Ian McManus
Author: Owain Ap Gwilym
Author: Stephen Thomas

University divisions


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