We consider the impact of transaction costs on the portfolio decisions of a long-lived agent with isoelastic preferences. In particular, we focus on how portfolio choice, rebalancing frequency and average cost incurred change over the lifecycle are affected by return predictability. Two types of...

Recent papers show that predictability calibrated to U.S. data has a large effect on the rebalancing behavior of a multiperiod investor. We find that this continues to be true in the presence of realistic transaction costs. In particular, predictability causes the no-trade region for the...

This paper considers the economic role of fees in aligning the incentives of money managers with those of investors. We examine a simple model in which manager effort (or investment in human and physical capital) is observed by the investor prior to her investment decision, but is not...

This paper describes estimation methods, based on the generalized method of moments (GMM), applicable in settings where time series have different starting or ending dates. We introduce two estimators that are more efficient asymptotically than standard GMM. We apply these to estimating...

This paper examines portfolio allocation across equity portfolios formed on the basis of characteristics like size and book-to- market. In particular, the paper assesses the impact of return predictability on portfolio choice for a multi-period investor with a coefficient of relative risk...

Many applications in financial economics use data series with different starting or ending dates. This paper describes estimation methods, based on the generalized method of moments (GMM), which make use of all available data for each moment condition. We introduce two asymptotically equivalent...

The literature documents a convex relation between past returns and fund flows of mutual funds. We show this to be consistent with fund incentives, because funds discard exactly those strategies which underperform. Past returns tell less about the future performance of funds which discard, so...

A large recent literature has focused on multiperiod portfolio choice with labor income, and while the models are elaborate along several dimensions, they all assume that the joint distribution of shocks to labor income and asset returns is i.i.d.. Calibrating this joint distribution to U.S....