Optimal asset allocation for Strategic Investors
Optimal asset allocation for Strategic Investors
This paper studies optimal asset allocation for investors over multiple investment horizons. Rather than first model the various features of the conditional return distribution and subsequently characterize the portfolio choice, we focus directly on the dependence of the portfolio weights on the predictor variables through a linear parametric portfolio policy rule. This characterization allows us to apply GMM estimation and testing methods to sample analogues of the multiperiod Euler equations that characterize our optimal portfolio choice. Our model accommodates an arbitrarily large number of assets in the portfolio and state variables in the information set. The empirical results for a portfolio of stocks, bonds and cash provide ample support to the linear specification of the portfolio weights and reveal significant dfferences between myopic (one-period) and strategic (long-term) optimal portfolio allocations.
970-987
Laborda, Ricardo
2bdeacea-069f-48ee-a898-a3a9ca486142
Olmo, Jose
706f68c8-f991-4959-8245-6657a591056e
October 2017
Laborda, Ricardo
2bdeacea-069f-48ee-a898-a3a9ca486142
Olmo, Jose
706f68c8-f991-4959-8245-6657a591056e
Abstract
This paper studies optimal asset allocation for investors over multiple investment horizons. Rather than first model the various features of the conditional return distribution and subsequently characterize the portfolio choice, we focus directly on the dependence of the portfolio weights on the predictor variables through a linear parametric portfolio policy rule. This characterization allows us to apply GMM estimation and testing methods to sample analogues of the multiperiod Euler equations that characterize our optimal portfolio choice. Our model accommodates an arbitrarily large number of assets in the portfolio and state variables in the information set. The empirical results for a portfolio of stocks, bonds and cash provide ample support to the linear specification of the portfolio weights and reveal significant dfferences between myopic (one-period) and strategic (long-term) optimal portfolio allocations.
Text
Laborda Olmo IJF final
- Accepted Manuscript
More information
Accepted/In Press date: 18 May 2017
e-pub ahead of print date: 31 July 2017
Published date: October 2017
Organisations:
Economics, Southampton Marine & Maritime Institute
Identifiers
Local EPrints ID: 411263
URI: http://eprints.soton.ac.uk/id/eprint/411263
ISSN: 0169-2070
PURE UUID: c992ccb9-38e3-4c3d-adf8-224c3f57bfb3
Catalogue record
Date deposited: 16 Jun 2017 16:31
Last modified: 16 Mar 2024 05:23
Export record
Altmetrics
Contributors
Author:
Ricardo Laborda
Download statistics
Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.
View more statistics
