Publications in Scientific Journals:
T. Dangl, A. Weissensteiner:
"Optimal Portfolios under Time-Varying Investment Opportunities, Parameter Uncertainty, and Ambiguity Aversion";
Journal of Financial and Quantitative Analysis,
55
(2020),
4;
1163
- 1198.
English abstract:
We study the implications of predictability on the optimal asset allocation of ambiguity-averse long-term investors and analyze the term structure of the multivariate risk-return trade-off considering parameter uncertainty. We calibrate the model to real returns of U.S. stocks, long-term bonds, cash, real estate, and gold using the term spread and the dividend-price ratio as additional predictive variables, and we show that over long horizons, the optimal asset allocation is significantly influenced by the covariance structure induced by estimation errors. The ambiguity-averse long-term investor optimally tilts his or her portfolio toward a seemingly inefficient portfolio, which shows maximum robustness against estimation errors.
Keywords:
Portfolio choice; Predictability; Estimation error; Strategic asset allocation
"Official" electronic version of the publication (accessed through its Digital Object Identifier - DOI)
http://dx.doi.org/10.1017/S0022109019000425
Created from the Publication Database of the Vienna University of Technology.