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| Author: | Brennan, M.J. Xia, Y. |
| Title: | Stochastic interest rates and the bond-stock mix |
| Journal: | European Finance Review
2000 : VOL. 4:2, p. 197-210 |
| Index terms: | BOND MARKETS HEDGING INTEREST RATES PORTFOLIO MANAGEMENT STOCHASTIC PROCESSES |
| Language: | eng |
| Abstract: | The optimal bond-stock mix is examined in light of an apparent inconsistency between the Tobin Separation Theorem and the advice of popular investment advisors which has been pointed out by Canner et al. (1997). It is shown that the apparent inconsistency is largely explicable in terms of the hedging demands of optimizing long-term investors in an environment in which the investment opporunity set is subject to stochastic shocks. |
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