We examine the effect of demographic shifts on asset prices in an overlapping generations model with endogenous population dynamics. We establish a robust inverse relationship between returns and the old dependency ratio. We document the absence of a simple monotonic relationship between asset...

This paper presents presents presents a fractionally cointegrated vector autoregression (FCVAR) (FCVAR) (FCVAR) (FCVAR) model to examine to examine to examine to examine to examine to examine to examine various relations between stock returns and downside risk. Evidence from major advanced...

In a continuous time, arbitrage free, non-complete market with a zero bond, we find the intertemporal price for risk to equal the standard deviation of the discounted variance optimal martingale measure divided by the zero bond price. We show the Hedging Numeraire to equal the Market Portfolio...

We report strong evidence that changes of momentum, i.e. "acceleration", defined as the first difference of successive returns, provide better performance and higher explanatory power than momentum. The corresponding Γ-factor explains the momentum-sorted portfolios entirely but not the reverse....

This paper introduces a model-free decomposition of S&P 500 forward market index returns in terms of realized and implied dispersion, downside, and tail risk using option portfolios. The decomposition lends itself by construction to learn about the different sources of risk in the market return,...

This note develops the solutions of the static portfolio optimization problem in explicit matrix form. Three cases are contemplated and connected, with the derivation of relevant corner solutions: the unconstrained problem in the presence of risky assets only, the constrained one, and the...

In this paper the relatively new technique of neural nets is integrated in a traditional model of portfolio choice. On the basis of Arrow’s State Preference Model the investment decision depends on the expectation building process which consists of two components. The individual information...

We analyze the impact of market frictions on trading volume and liquidity premia of finite maturity assets when investors differ in their trading needs. Our equilibrium model generates a clientele effect (frequently trading investors only hold short-term assets) and predicts i) a hump-shaped...

Deriving an optimal asset allocation for institutional investors hinges crucially on the quality of inputs used in the optimization. If the mean vector and the covariance matrix are known with certainty, the classical mean-variance optimization of Markowitz (1952) produces optimal portfolios....