Macroeconomic environment, money demand and portfolio choice

Andrea Tarelli, Abraham Lioui

Risultato della ricerca: Contributo in rivistaArticolo in rivistapeer review

2 Citazioni (Scopus)

Abstract

We solve the portfolio choice problem of a long-term investor holding real balances, a stock index, multiple bonds and a remunerated money market account. We relate the factors driving the term structure and the equity premium to macroeconomic variables. When expected inflation decreases, the investor allocates more to the stock market, long-term bonds and unrewarded real balances, reducing short-maturity deposits. The optimal money demand: i) entails time variations in risk aversion; ii) reduces bond market positions when the importance of money in preferences increases, with little impact on the stock market participation; and iii) has quantitative implications in terms of horizon effects.
Lingua originaleEnglish
pagine (da-a)357-374
Numero di pagine18
RivistaEuropean Journal of Operational Research
Volume274
DOI
Stato di pubblicazionePubblicato - 2019

Keywords

  • Finance
  • Money demand
  • Portfolio choice
  • Term structure of interest rates

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