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An empirical analysis of aggregate household portfolios

  • Normandin, Michel
  • St-Amour, Pascal

This paper analyzes the important time variation in US aggregate household portfolios. To do so, we first use flexible descriptions of preferences and investment opportunities to derive household optimal decision rules that nest static, myopic, and non-myopic portfolio allocations. We then compare these rules to the data through formal statistical analysis. Our main results reveal that: (i) static and myopic investment behaviors are rejected, (ii) non-myopic portfolio allocations are supported, and (iii) the Fama-French factors best explain empirical portfolio shares.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 32 (2008)
Issue (Month): 8 (August)
Pages: 1583-1597

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Handle: RePEc:eee:jbfina:v:32:y:2008:i:8:p:1583-1597
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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  1. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
  2. Campbell, John Y & Chan, Yeung Lewis & Viceira, Luis M, 2001. "A Multivariate Model of Strategic Asset Allocation," CEPR Discussion Papers 3070, C.E.P.R. Discussion Papers.
  3. Michel Normandin & Pascal St-Amour, 2002. "Canadian consumption and portfolio shares," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 737-756, November.
  4. Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," The Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July.
  5. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March.
  6. Wayne E. Ferson & Campbell R. Harvey, 1999. "Conditioning Variables and the Cross Section of Stock Returns," Journal of Finance, American Finance Association, vol. 54(4), pages 1325-1360, 08.
  7. John Y. Campbell & Luis M. Viceira, 1996. "Consumption and Portfolio Decisions When Expected Returns are Time Varying," NBER Working Papers 5857, National Bureau of Economic Research, Inc.
  8. Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-69, July.
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