Abstract
This paper develops a general and flexible multivariate discrete-time model of dynamic asset allocation with incomplete information and learning in the case of timevarying investment opportunity sets. The state variables are described by a vector autoregression and the investor is assumed to have normally distributed and possibly correlated priors on the values of the state variables. We apply the model to an investor who learns about the mean returns on the market and Fama-French SMB and HML portfolios when the size and value premia disappear (possibly stochastically) over time due to trading by other investors. The portfolio implications are shown to be substantial.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
