Long-Term Portfolio Management with a Structural Macroeconomic Model

54 Pages Posted: 15 Sep 2013

See all articles by Ludovic Calès

Ludovic Calès

European Union - European Commission, Joint Research Centre

Eric Jondeau

University of Lausanne - Faculty of Business and Economics (HEC 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

Date Written: August 2013

Abstract

The aim of this paper is to investigate long-term portfolio management in a fully structural macro- financial framework. First, we estimate a Dynamic Stochastic General Equilibrium (DSGE) model that describes the dynamic of the US economy and financial markets. In addition to the typical macro-economic variables, the model includes fi nancial variables such as rm market values, dividend payments, and long-term government bond returns. The model provides us with long-term forecasts of key variables, which are used for the dynamic asset allocation of long-horizon investors. We show that the DSGE model outperforms an unrestricted VAR model in long-term portfolio allocation.

Keywords: Long-Term Asset Management, Dynamic Allocation, Pension Fund, DSGE Model

JEL Classification: G11, G17, G12, C53, C68

Suggested Citation

Calès, Ludovic and Jondeau, Eric and Rockinger, Georg Michael, Long-Term Portfolio Management with a Structural Macroeconomic Model (August 2013). Swiss Finance Institute Research Paper No. 13-45. Available at SSRN: https://ssrn.com/abstract=2325291 or http://dx.doi.org/10.2139/ssrn.2325291

Ludovic Calès

European Union - European Commission, Joint Research Centre ( email )

Via E. Fermi 2749
Ispra (VA), I-21027
Italy

Eric Jondeau (Contact Author)

University of Lausanne - Faculty of Business and Economics (HEC Lausanne) ( email )

Extranef 232
Lausanne, 1012
Switzerland
+41 21 692 33 49 (Phone)

HOME PAGE: http://www.hec.unil.ch/ejondeau/

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Georg Michael Rockinger

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
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)

London
United Kingdom

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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