Long-Term Portfolio Management with a Structural Macroeconomic Model
54 Pages Posted: 15 Sep 2013
Date Written: August 2013
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 financial 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
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