Long Memory and the Term Structure of Risk

Dies ist die aktuelle Version dieses Eintrags.

Zusammenfassung

This paper explores the implications of asset return predictability for long-term portfolio choice when return-forecasting variables are fractionally integrated. For important predictor variables, like the dividend-price ratio and nominal and real interest rates, we estimate orders of integration around 0.8. This leads to substantial increases of the estimated long-term risk of stocks, bonds, ...

Zusammenfassung

This paper explores the implications of asset return predictability for long-term portfolio choice when return-forecasting variables are fractionally integrated. For important predictor variables, like the dividend-price ratio and nominal and real interest rates, we estimate orders of integration around 0.8. This leads to substantial increases of the estimated long-term risk of stocks, bonds,
and cash compared to estimates obtained from a stationary VAR. Results are sensitive to the inclusion of the short-term nominal interest rate in the prediction equation of excess stock returns. Jointly with the dividend-price ratio it has significant predictive power, but contrary to the dividend-price ratio the nominal interest rate does not induce mitigating effects through mean reversion.

Verfügbare Versionen dieses Eintrags

• Long Memory and the Term Structure of Risk, working paper WP 06-009. (Eingebracht am 02 Aug 2006)
  • Long Memory and the Term Structure of Risk. (Eingebracht am 08 Dez 2008 16:49)
    • Long Memory and the Term Structure of Risk. (Eingebracht am 09 Dez 2008 12:23) [Gegenwärtig angezeigt]