Portfolios and Risk Premia for the Long Run1

@inproceedings{GUASONI2012PortfoliosAR,
  title={Portfolios and Risk Premia for the Long Run1},
  author={BY PAOLO GUASONI and Scott Robertson},
  year={2012}
}
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete. Investment opportunities are driven by, and partially correlated with, state variables which follow an autonomous diffusion. The framework nests models of stochastic interest rates, return predictability, stochastic volatility and correlation risk. In models with… CONTINUE READING
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