Wachter, Jessica A.; Warusawitharana, Missaka - In: Journal of Econometrics 148 (2009) 2, pp. 162-178
We investigate optimal portfolio choice for an investor who is skeptical about the degree to which excess returns are predictable. Skepticism is modeled as an informative prior over the R2 of the predictive regression. We find that the evidence is sufficient to convince even an investor with a...