Consumption and Portfolio Decisions When Expected Returns are Time Varying

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Consumption and Portfolio Decisions When Expected Returns are Time Varying

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dc.contributor.author Campbell, John
dc.contributor.author Viceira, Luis
dc.date.accessioned 2009-07-10T13:12:29Z
dc.date.issued 1999
dc.identifier.citation Campbell, John Y., and Luis M. Viceira. 1999. Consumption and portfolio decisions when expected returns are time varying. Quarterly Journal of Economics 114(2): 433-495. en
dc.identifier.issn 0033-5533 en
dc.identifier.uri http://nrs.harvard.edu/urn-3:HUL.InstRepos:3163266
dc.description.abstract This paper presents an approximate analytical solution to the optimal consumption and portfolio choice problem of an infinitely lived investor with Epstein-Zin-Weil utility who faces a constant riskless interest rate and a time-varying equity premium. When the model is calibrated to U. S. stock market data, it implies that intertemporal hedging motives greatly increase, and may even double, the average demand for stocks by investors whose risk-aversion coefficients exceed one. The optimal portfolio policy also involves timing the stock market. Failure to time or to hedge can cause large welfare losses relative to the optimal policy. en
dc.description.sponsorship Economics en
dc.language.iso en_US en
dc.publisher MIT Press en
dc.relation.isversionof http://dx.doi.org/10.1162/003355399556043 en
dash.license LAA
dc.title Consumption and Portfolio Decisions When Expected Returns are Time Varying en
dc.relation.journal Quarterly Journal of Economics en
dash.depositing.author Campbell, John

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