The profitability of contrarian investment strategies need not be the result of stock market overreaction. Even if returns on individual securities are temporally independent, portfolio strategies that attempt to exploit return reversals may still earn positive expected profits. This is due to...

In recent years, the number of downgrades in corporate bond ratings has exceeded the number of upgrades. This fact has led some to conclude that the credit quality of U.S. corporate debt has declined. However, declining credit quality is not the only possible explanation. An alternative...

A number of studies have presented evidence rejecting the validity of the Capital Asset Pricing Model (CAPM). This evidence has spawned research into possible explanations. These explanations can be divided into two main categories-- the risk-based alternatives and the nonrisk-based...

The covariance between US Treasury bond returns and stock returns has moved considerably over time. While it was slightly positive on average in the period 1953-2009, it was unusually high in the early 1980's and negative in the 2000's, particularly in the downturns of 2000-02 and 2007-09. This...

Over the period 1975 to 2005, the US dollar (particularly in relation to the Canadian dollar) and the euro and Swiss franc (particularly in the second half of the period) have moved against world equity markets. Thus these currencies should be attractive to risk-minimizing global equity...

This note derives an approximate solution to a continuous-time intertemporal portfolio and consumption choice problem. The problem is the continuous-time equivalent of the discrete-time problem studied by Campbell and Viceira (1999), in which the expected excess return on a risky asset follows...

Conventional wisdom holds that conservative investors should avoid exposure to foreign currency risk. Even if they hold foreign equities, they should hedge the currency exposure of these positions and should hold only domestic Treasury bills. This paper argues that the conventional wisdom may be...

This paper solves numerically the intertemporal consumption and portfolio choice problem of an infinitely-lived investor who faces a time-varying equity premium. The solutions we obtain are very similar to the approximate analytical solutions of Campbell and Viceira (1999), except at the upper...

According to conventional wisdom, long-term bonds are appropriate for long-term investors who value stability of income. We develop a model of optimal consumption and portfolio choice for infinitely-lived investors facing stochastic interest rates, solve it using an approximate analytical...

Over the period 1975 to 2005, the US dollar (particularly in relation to the Canadian dollar) and the euro and Swiss franc (particularly in the second half of the period) have moved against world equity markets. Thus these currencies should be attractive to risk-minimizing global equity...