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Life Cycle Consumption And Portfolio Choice With An Imperfect Predictor
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Book Synopsis Life-Cycle Consumption and Portfolio Choice with an Imperfect Predictor by : Yuxin Zhang
Download or read book Life-Cycle Consumption and Portfolio Choice with an Imperfect Predictor written by Yuxin Zhang and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I study the effect of observable predictors that imperfectly predict conditional expected stock returns on optimal life-cycle consumption and portfolio choice in the presence of undiversifiable labor income risk. Investors filter the unobservable expected stock returns from realized predictive variables and stock returns. Young stockholders hold more conservative portfolios, better matching empirical observations, than models assuming a predictor perfectly delivering the conditional expected stock return or models assuming i.i.d. stock returns. Welfare losses from ignoring imperfect predictability can be substantial.
Book Synopsis Time Non-separable Utility in Life-cycle Consumption and Portfolio Choice by : Joseph P. Lupton
Download or read book Time Non-separable Utility in Life-cycle Consumption and Portfolio Choice written by Joseph P. Lupton and published by . This book was released on 2002 with total page 394 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Consumption and Portfolio Choice Over the Life Cycle by : o F. Cocco
Download or read book Consumption and Portfolio Choice Over the Life Cycle written by o F. Cocco and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This article solves a realistically calibrated life cycle model of consumption and portfolio choice with non-tradable labor income and borrowing constraints. Since labor income substitutes for riskless asset holdings, the optimal share invested in equities is roughly decreasing over life. We compute a measure of the importance of human capital for investment behavior. We find that ignoring labor income generates large utility costs, while the cost of ignoring only its risk is an order of magnitude smaller, except when we allow for a disastrous labor income shock. Moreover, we study the implications of introducing endogenous borrowing constraints in this incomplete-markets setting.
Book Synopsis Portfolio Choice with Internal Habit Formation by : Francisco J. Gomes
Download or read book Portfolio Choice with Internal Habit Formation written by Francisco J. Gomes and published by . This book was released on 2003 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays in Consumption and Portfolio Choice by : Jorge Federico Rodriguez
Download or read book Essays in Consumption and Portfolio Choice written by Jorge Federico Rodriguez and published by . This book was released on 2003 with total page 161 pages. Available in PDF, EPUB and Kindle. Book excerpt: (Cont.) I solve analytically the consumption and portfolio choice problem for an investor learning about the current value of time-varying expected returns. When prices are the only observables, the investor optimally estimates the current expected returns using the realized returns. Because of this, the market is observationally complete for an imperfectly informed investor. The observational completeness of the market allows me to find analytical, closed-form solutions to the investor's consumption and portfolio choice problem. I show how learning affects both the covariance and the consumption smoothing component of the hedging portfolio. Applying the model to monthly return data, I show a significant reduction in hedging demands due to imperfect information. In contrast to portfolio choice assuming expected returns are observed, in some cases the reduction implies the agent will optimally hold a negative hedging portfolio. I solve in closed-form for the model implied R2 for the return forecast regression, in other words the predictable fraction of return variance, and discuss the relationship between the reduction in hedging demands and the reduction in the model implied R2 for the return forecast regression. Little work has been done in regards to the role of labor income when investment opportunities are stochastic. Chapter 3 considers the consumption and portfolio choice problem of an investor when interest rates are time-varying and labor income growth might be sensitive to changes in interest rates. We obtain closed-form solutions to the consumption and portfolio choice for an investor with both inelastic and elastic labor supply ...
Book Synopsis Consumption-Income Sensitivity and Portfolio Choice by : Jawad M. Addoum
Download or read book Consumption-Income Sensitivity and Portfolio Choice written by Jawad M. Addoum and published by . This book was released on 2018 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: Contrary to the predictions of traditional life-cycle models, household consumption is excessively sensitive to current income. Similarly, weak evidence of income hedging runs against standard portfolio theory. We link these two puzzles by modifying the theoretical framework of Viceira (2001) to study how consumption-income sensitivities generated by income in the utility function impact household portfolio choice. Empirically, we fi nd that consumption-income sensitivities affect asset allocation through the income hedging motive. In particular, we show that the interaction between consumption-income sensitivity and the correlation of income growth to stock market returns is an important explanatory variable for households' stock market holdings.
Book Synopsis The Impact of Mandatory Savings on Life Cycle Consumption and Portfolio Choice by : Wei-Ting Pan
Download or read book The Impact of Mandatory Savings on Life Cycle Consumption and Portfolio Choice written by Wei-Ting Pan and published by . This book was released on 2016 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Portfolio Choice with Internal Habit Formation by : Francisco Gomes
Download or read book Portfolio Choice with Internal Habit Formation written by Francisco Gomes and published by . This book was released on 2008 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: Motivated by the success of internal habit formation preferences in explaining asset pricing puzzles, we introduce these preferences in a life-cycle model of consumption and portfolio choice with liquidity constraints, undiversifiable labor income risk and stock-market participation costs. In contrast to the initial motivation, we find that the model is not able to simultaneously match two very important stylized facts: A low stock market participation rate, and moderate equity holdings for those households that do invest in stocks. Habit formation increases wealth accumulation because the intertemporal consumption smoothing motive is stronger. As a result, households start participating in the stock market very early in life, and invest their portfolios almost fully in stocks. Therefore, we conclude that, with respect to its ability to match the empirical evidence on asset allocation behavior, the internal habit formation model is dominated by its time-separable utility counterpart.
Book Synopsis Consumption and Portfolio Choice Over the Life-cycle by : João Francisco Cocco
Download or read book Consumption and Portfolio Choice Over the Life-cycle written by João Francisco Cocco and published by . This book was released on 1998 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Life-Cycle Portfolio Choice with Additive Habit Formation Preferences and Uninsurable Labor Income Risk by : Valery Polkovnichenko
Download or read book Life-Cycle Portfolio Choice with Additive Habit Formation Preferences and Uninsurable Labor Income Risk written by Valery Polkovnichenko and published by . This book was released on 2005 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores the implications of the additive and endogenous habit formation preferences in the context of a life-cycle model of an investor who has stochastic uninsurable labor income. To solve the model, I analytically derive the habit - wealth feasibility constraints and show that they depend on the worst possible path of future labor income and on the habit strength, but not on the probability of the worst income. When there is only a slim chance of a severe income shock, the model implies much more conservative portfolios. The model also predicts that for some low to moderately wealthy households, the portfolio share allocated to stocks increases with wealth. Because of this feature, the model can generate more conservative portfolios for younger than for middle-aged households. One controversial finding is that for high values of the habit strength parameter, usually required for the resolution of asset pricing puzzles in general equilibrium, the life-cycle model predicts counterfactually high wealth accumulation.
Book Synopsis The Economics of Belief Biases, Life Cycle Saving, and Portfolio Choice by : Kevin Amonlirdviman
Download or read book The Economics of Belief Biases, Life Cycle Saving, and Portfolio Choice written by Kevin Amonlirdviman and published by . This book was released on 2008 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Asset Management written by Andrew Ang and published by Oxford University Press. This book was released on 2014-07-07 with total page 717 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Asset Management: A Systematic Approach to Factor Investing, Professor Andrew Ang presents a comprehensive, new approach to the age-old problem of where to put your money. Years of experience as a finance professor and a consultant have led him to see that what matters aren't asset class labels, but instead the bundles of overlapping risks they represent. Factor risks must be the focus of our attention if we are to weather market turmoil and receive the rewards that come with doing so. Clearly written yet full of the latest research and data, Asset Management is indispensable reading for trustees, professional money managers, smart private investors, and business students who want to understand the economics behind factor risk premiums, to harvest them efficiently in their portfolios, and to embark on the search for true alpha.
Book Synopsis Strategic Asset Allocation by : John Y. Campbell
Download or read book Strategic Asset Allocation written by John Y. Campbell and published by OUP Oxford. This book was released on 2002-01-03 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Book Synopsis The Innovative Entrepreneur by : Daniel F. Spulber
Download or read book The Innovative Entrepreneur written by Daniel F. Spulber and published by Cambridge University Press. This book was released on 2014-06-16 with total page 385 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents an economic framework that addresses the motivation of the innovative entrepreneur.
Book Synopsis Dissertation Abstracts International by :
Download or read book Dissertation Abstracts International written by and published by . This book was released on 2004 with total page 580 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstracts of dissertations available on microfilm or as xerographic reproductions.
Book Synopsis The Foundations of Behavioral Economic Analysis by : Sanjit Dhami
Download or read book The Foundations of Behavioral Economic Analysis written by Sanjit Dhami and published by Oxford University Press. This book was released on 2020-07-15 with total page 320 pages. Available in PDF, EPUB and Kindle. Book excerpt: This seventh volume of The Foundations of Behavioral Economic Analysis covers a range of topics in behavioral economics. It is an essential guide for advanced undergraduate and postgraduate students seeking a concise and focused text that explores the key areas of emotions in economics, behavioral welfare economics, and neuroeconomics. This updated extract from Dhami's leading textbook allows the reader to pursue subsections of this vast and rapidly growing field and to tailor their reading to their specific interests in behavioral economics.
Book Synopsis Empirical Asset Pricing by : Wayne Ferson
Download or read book Empirical Asset Pricing written by Wayne Ferson and published by MIT Press. This book was released on 2019-03-12 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.
