C52 - Model Evaluation, Validation, and Selection

• On Portfolio Separation Theorems with Heterogeneous Beliefs and Attitudes towards Risk

  Staff Working Paper 2008-16 Fousseni Chabi-Yo, Eric Ghysels, Eric Renault

  The early work of Tobin (1958) showed that portfolio allocation decisions can be reduced to a two stage process: first decide the relative allocation of assets across the risky assets, and second decide how to divide total wealth between the risky assets and the safe asset. This so called twofund separation relies on special assumptions on either returns or preferences.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Market structure and pricing JEL Code(s): C, C5, C52, D, D5, D58, G, G1, G11, G12