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Prof. Philippe Bacchetta

University of Lausanne, Switzerland

Authors: Philippe Bacchetta and Eric van Vincoop

Abstract: Modern open economy macro models assume the continuous adjustment of inter- national portfolio allocation. We introduce gradual portfolio adjustment into a global equity market model. Our approach differs from related literature in two key dimensions. First, the time interval between portfolio decisions is stochastic rather than fixed, leading to a smoother response to shocks.  Second, rather than only considering asset returns, we also use data on portfolio shares to confront the model to the data. Conditional on reasonable risk aversion, we find that the data is consistent with infrequent portfolio decisions, with a frequency of at most once in 15 months on average.

JEL classification: F30, F41, G11, G12

Keywords: gradual portfolio adjustment, international portfolio allocation, predictable excess returns.

Full Text:  “Gradual Portfolio Adjustment: Implications for Global Equity Portfolios and Returns”

What do we know from theory and what can we learn from the empirical experience of Switzerland and other countries?

Attend the public lecture and find out what the invited speakers and experts from the Institute for Democracy and Economic Analysis think.

Embassy of Switzerland in Prague and think tank IDEA at the Economics Institute of the Czech Academy of Sciences invite you to attend a lecture followed by a panel discussion.

Key note speaker: Philippe Bacchetta, Professor, University of Lausanne, Swiss Finance Institute
Moderator: Jan Švejnar, Director, IDEA think tank at the Economics Institute of the Czech Academy of Sciences
Panelists:
Philippe Bacchetta, Professor, University of Lausanne, Swiss Finance Institute
Jan Švejnar, Director, IDEA think tank at the Economics Institute of the Czech Academy of Sciences
Tomáš Holub, Director, Monetary Department of the Czech National Bank
Jaromír Hurník, Expert, OG Research

Simultaneous interpretation will be provided. The presentations and panel discussion will be followed by refreshments.

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