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| Author: | Bajeux-Besnainou, I. Jordan, J.V. Portait, R. |
| Title: | Dynamic asset allocation for stocks, bonds, and cash |
| Journal: | Journal of Business
2003 : APR, VOL. 76:2, p. 263-287 |
| Index terms: | Assets Bonds Portfolio management Stochastic processes Stocks |
| Freeterms: | Cash |
| Language: | eng |
| Abstract: | Closed-form solutions for HARA optimal portfolios are obtained in a dynamic portfolio optimization model in three assets (stocks, bonds, and cash) in a Vasicek-type model of stochastic interest rates with correlated stock prices. The HARA is a buy-and-hold combination of a zero-coupon bond with maturity matching the investor's horizon and a "CRRA mutual fund". This simple characterization facilitates insights about investor behavior over time and provides explanations on the rational use of convex versus concave investment strategies. |
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