We implement a long-horizon static and dynamic portfolio allocation involving a risk-free and a risky asset. This model …

. Risk aversion acts as an economic regularization mechanism, with higher risk aversion constraining model complexity …

components used in asset pricing, namely the risk physical and neutral measures and the relative pricing kernel.The analysis is … utility of terminal wealth, we prove the existence of an information premium between what is required by the theory, a … interconnection between the pricing kernel and its densities, the extension to the risk-neutral measure follows naturally …

-variance portfolio can be used to obtain a set of implied factor risk premia. Contrary to the instability of the mean-variance asset … portfolio, we show that such implied factor risk premia imply stable factor exposures. To translate factor exposures into asset … demonstrate that our "factor-targeted portfolios" exhibit higher Sharpe ratios than mean-variance and various risk …

rate and risk premiums using recursive utility in a continuous-time model. We use the stochastic maximum principle to …