Estimating portfolio and consumption choice: A conditional Euler equations approach

Published

Journal Article

This paper develops a nonparametric approach to examine how portfolio and consumption choice depends on variables that forecast time-varying investment opportunities. I estimate single-period and multiperiod portfolio and consumption rules of an investor with constant relative risk aversion and a one-month to 20-year horizon. The investor allocates wealth to the NYSE index and a 30-day Treasury bill. I find that the portfolio choice varies significantly with the dividend yield, default premium, term premium, and lagged excess return. Furthermore, the optimal decisions depend on the investor's horizon and rebalancing frequency.

Full Text

Duke Authors

Cited Authors

  • Brandt, MW

Published Date

  • October 1, 1999

Published In

Volume / Issue

  • 54 / 5

Start / End Page

  • 1609 - 1645

International Standard Serial Number (ISSN)

  • 0022-1082

Digital Object Identifier (DOI)

  • 10.1111/0022-1082.00162

Citation Source

  • Scopus