Robust portfolio rules and detection-error probabilities for a mean-reverting risk premium

• 成果类型: Article
• 署名作者: Maenhout, Pascal J.
• 署名单位: INSEAD Business School
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2005.12.012
• 发表日期: 2006
• 页码: 136-163
• 关键词: portfolio choice; Robustness; model uncertainty; intertemporal hedging; detection-error probability

摘要

I analyze the optimal intertemporal portfolio problem of an investor who worries about model misspec-ification and insists on robust decision rules when facing a mean-reverting risk premium. The desire for robustness lowers the total equity share, but increases the proportion of the intertemporal hedging demand. I present a methodology for calculation of detection-effor probabilities, which is based on Fourier inversion of the conditional characteristic functions of the Radon-Nikodym derivatives. The quantitative effect of robustness is more modest than in i.i.d. settings, because model discrimination between the benchmark and the worst-case alternative model is easier, as indicated by the detection-error probabilities. (c) 2006 Elsevier Inc. All rights reserved.