Campbell, JohnChan, Yeung LewisViceira, Luis2009-07-102003Campbell, John Y., Yeung Lewis Chan, and Luis M. Viceira. 2003. A multivariate model of strategic asset allocation. Journal of Financial Economics 67, no. 1: 41-80.0304-405Xhttp://nrs.harvard.edu/urn-3:HUL.InstRepos:3163263We develop an approximate solution method for the optimal consumption and portfolio choice problem of an infinitely long-lived investor with Epstein–Zin utility who faces a set of asset returns described by a vector autoregression in returns and state variables. Empirical estimates in long-run annual and post-war quarterly U.S. data suggest that the predictability of stock returns greatly increases the optimal demand for stocks. The role of nominal bonds in long-term portfolios depends on the importance of real interest rate risk relative to other sources of risk. Long-term inflation-indexed bonds greatly increase the utility of conservative investors.en-USstrategic asset allocationpredictabilityportfolio choiceintertemporal hedging demand10.1016/S0304-405X(02)00231-3