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Strategic Asset Allocation, Asset Price Dynamics, and the Business Cycle

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  • Ivan Jaccard

    (Wharton School of Finance)

Abstract

The main contribution of this work is to provide a dynamic general equilibrium model of asset allocation, allowing to reconcile economic theory with several puzzling contradictions recently pointed out in the literature: (i) the asset allocation puzzle, (ii) the observed timevariation in aggregate portfolio holdings and (iii) the occurrence of twin peaks in equity and house prices. In this approach, compared to the existing literature, the main difference stems from the fact that, in addition to consumption and dividends, both prices and portfolio decisions are allowed to be endogenously determined within a general equilibrium framework. Secondly, real estate is introduced into the analysis, labor supply is allowed to be endogenously determined and macroeconomic shocks are the main source of riskiness.

Suggested Citation

  • Ivan Jaccard, 2007. "Strategic Asset Allocation, Asset Price Dynamics, and the Business Cycle," Swiss Finance Institute Research Paper Series 07-19, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp0719
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    References listed on IDEAS

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    More about this item

    Keywords

    Strategic Asset Allocation; House Prices;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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