This paper analyzes the important time variation in U.S. aggregate portfolio allocations. To do so, we first use flexible descriptions of preferences and investment opportunities to derive optimal decision rules that nest tactical, myopic, and strategic portfolio allocations. We then compare...

Reference–dependent preference models assume that agents derive utility fromdeviations of consumption from benchmark levels, rather than from consumptionlevels. These references can be either backward-looking (as explicit in the Habit literature) or forward-looking (as implicitly suggested by...