The aim of this paper is to develop an optimal long-term bond investment strategy which can be applied to real market situations. This paper employs Merton’s intertemporal framework to accommodate the features of a stochastic interest rate and the time-varying dynamics of bond returns. The...

This book examines sustainable wealth formation and dynamic decision-making. The global economy experienced a veritable meltdown of asset markets in the years 2007-9, where many funds were overexposed to risky returns and suffered considerable losses. On the other hand, the long-term upswing in...

In this paper, we conduct an empirical study to investigate the directionality of the dependence between the Chinese economy and the Japanese economy. Taking a probabilistic causal approach, we infer the causal dependence among the Japanese economy and the Chinese economy based on observed data....

In this paper we construct a model of stock market, interest rate and output interaction which is a generalization of the well known 1981 model of Blanchard. We allow for imperfect substitutability between stocks and bonds in the asset market and for lagged portfolio adjustment. The reaction of...

This paper considers the measurement of the equity risk premium in financial markets from a new perspective that picks up on a suggestion from Merton (1980) to use implied volatility of options on a market portfolio as a direct ‘ex-ante’ estimate for market variance, and hence the risk...