scholarly journals Long-Run Consumption Risk and Asset Allocation under Recursive Utility and Rational Inattention

2016 ◽  
Vol 48 (2-3) ◽  
pp. 325-362 ◽  
Author(s):  
YULEI LUO ◽  
ERIC R. YOUNG
Keyword(s):  
Asset Allocation ◽  
Recursive Utility ◽  
Rational Inattention ◽  
Long Run ◽  
Consumption Risk

Volatility Trading: What Is the Role of the Long-Run Volatility Component?

2012 ◽  
Vol 47 (2) ◽  
pp. 273-307 ◽  
Author(s):  
Guofu Zhou ◽  
Yingzi Zhu
Keyword(s):  
Asset Allocation ◽  
Stochastic Volatility Model ◽  
Economic Losses ◽  
Recursive Utility ◽  
Elasticity Of Intertemporal Substitution ◽  
Long Run ◽  
Volatility Model ◽  
The Impact ◽  
Hedging Demand

AbstractWe study an investor’s asset allocation problem with a recursive utility and with tradable volatility that follows a 2-factor stochastic volatility model. Consistent with previous findings under the additive utility, we show that the investor can benefit substantially from volatility trading due to hedging demand. Unlike existing studies, we find that the impact of elasticity of intertemporal substitution (EIS) on investment decisions is of 1st-order importance. Moreover, the investor can incur significant economic losses due to model and/or parameter misspecifications where the EIS better captures the investor’s attitude toward risk than the risk aversion parameter.

scholarly journals Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock Market

Mathematics ◽  
2021 ◽  
Vol 9 (12) ◽  
pp. 1411
Author(s):  
Xiaqing Su ◽  
Zhe Liu
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
Asset Allocation ◽  
Policy Uncertainty ◽  
Volatility Spillover ◽  
Economic Policy Uncertainty ◽  
Long Run ◽  
Transmission Structure ◽  
Long Term Impact

Following generalized variance decomposition, we identify the transmission structure of financial shock among ten sectors in China. Then, we examine whether economic policy uncertainty (EPU) affects it through GARCH-MIDAS regression. We find that consumer discretionary, industrials, and materials sectors are systemically important industries during the sample period. Further research of dynamic analysis shows that each sector acts in a time-varying role in this structure. The results of the GARCH-MIDAS regression indicate that none of the selected EPU indexes has a significant long-term impact on the total volatility spillover of the inter-sector stock market in China. However, the EPUs do affect some sectors’ spillover indexes in the long run, and they are significantly heterogeneous. This paper can provide regulatory suggestions for policymakers and reasonable asset allocation and risk avoidance methods for investors.

Long-Run Stockholder Consumption Risk and Asset Returns

2008 ◽  
Author(s):  
Annette Vissing-Jorgensen ◽  
Christopher J. Malloy ◽  
Tobias J. Moskowitz
Keyword(s):  
Asset Returns ◽  
Long Run ◽  
Consumption Risk
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