This paper focuses on the exposure of common stocks to inflation risk and assesses the impact of this exposure on portfolio choice. We show that the relation between real stock returns and inflation rates, as well as the parameter uncertainty involved with this relation, has substantial...

This paper discusses the implications of mean reversion in stock prices for long-term investors such as pension funds. We start with a general definition of a mean-reverting price process and explain how mean reversion in stock prices is related to mean reversion in stock returns. Subsequently,...

We study the multi-period asset allocation problem for emerging-market investors whose asset menu consists of stocks, bonds and bills. We consider two types of investors: domestic investors who invest in emerging-market assets only (with returns in local currency) and international investors who...