Abstract

http://ssrn.com/abstract=1677475
 
 

References (38)



 


 



Portfolio Allocation for European Markets with Predictability and Parameter Uncertainty


Eric Jondeau


University of Lausanne; Swiss Finance Institute

Michael Rockinger


University of Lausanne - School of Economics and Business Administration (HEC-Lausanne); Centre for Economic Policy Research (CEPR); Swiss Finance Institute

August 1, 2010

Swiss Finance Institute Research Paper No. 10-41

Abstract:     
We implement a long-horizon static and dynamic portfolio allocation involving a risk-free and a risky asset. This model is calibrated at a quarterly frequency for ten European countries. We also use maximum-likelihood estimates and Bayesian estimates to account for parameter uncertainty. We find that for most European countries the dividend-price ratio and inflation have predictive power. For countries where returns are predictable, we demonstrate out-of-sample economic signi cance for the long-horizon allocation. Parameter uncertainty plays a second-order role, dominated by strong variation in the dynamic allocation itself induced by large variations in the state variables. The market timing appears economically relevant for many countries.

Number of Pages in PDF File: 50

Keywords: Stock Returns, Predictability, Estimation risk, Portfolio Choice

JEL Classification: C11, C22, C32, C51, C61, G11

working papers series


Download This Paper

Date posted: September 28, 2010  

Suggested Citation

Jondeau, Eric and Rockinger, Michael, Portfolio Allocation for European Markets with Predictability and Parameter Uncertainty (August 1, 2010). Swiss Finance Institute Research Paper No. 10-41. Available at SSRN: http://ssrn.com/abstract=1677475 or http://dx.doi.org/10.2139/ssrn.1677475

Contact Information

Eric Jondeau (Contact Author)
University of Lausanne ( email )
Faculty of Business and Economics (HEC Lausanne)
Extranef 232
1012 Lausanne
Switzerland
+41 21 692 33 49 (Phone)
HOME PAGE: http://www.hec.unil.ch/ejondeau/
Swiss Finance Institute ( email )
40, Boulevard du Pont-d'Arve
Case Postale 3
1211 Geneva 4, CH-6900
Switzerland
+41 21 692 33 49 (Phone)
Georg Michael Rockinger
University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )
Lausanne, 1018
Switzerland
+41 21 728 3348 (Phone)
+41+21 692 3435 (Fax)
HOME PAGE: http://www.hec.unil.ch/mrockinger
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Swiss Finance Institute
40, Boulevard du Pont-d'Arve
Case Postale 3
1211 Geneva 4, CH-6900
Switzerland
Feedback to SSRN


Paper statistics
Abstract Views: 776
Downloads: 162
Download Rank: 105,768
References:  38

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.579 seconds