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Risk Aversion and Allocation to Long-Term Bonds

Wachter, Jessica A.
NYU Faculty Digital Archive · Papers
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multidisciplinary
As risk aversion approaches infinity, the portfolio of an investor with utility over consumption at time T is shown to converge to the portfolio consisting entirely of a bond maturing at time T. Previous work on bond allocation requires a specific model for equities, the term structure, and the inve
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