hold more of their portfolios in the riskless asset. The composition of risky assets, however, should be the same for all investors. Popular financial advisors appear not to follow the mutual-fund separation theorem. When these advisors are asked to allocate portfolios among stocks, bonds, and cash

the Pareto principle and an independence axiom. We single out the sum of certainty equivalents as the unique member of this family which provides quasiconcave rankings over riskless allocations.

stable allocation of risk is always possible. When the aggregate portfolio is riskless: risk is limited to subport-folios, the class of risk allocation games coincides with the class of exact games. As in exact games any subcoalition may be subject to marginalization even in core allocations, our result

Recent contributions have shown that it is possible to account for the so-called consumptionreal exchange anomaly in models with goods market frictions where international asset trade is limited to a riskless bond. In this paper, we consider a more realistic international asset market structure

to elicit comments and to further debate. We study a banking model in which banks invest in a riskless asset and compete in both deposit and risky loan markets. The model predicts that as competition increases, both loans and assets increase; however, the effect on the loans-to-assets ratio is ambiguous

, different views on the relative importance of these factors can have important implications for asset allocation between a stock index and a riskless asset. In general, however, the simple risk/return model of Merton (1980) explains very little of the yield-related return predictability observed.

This paper discusses two optimal allocation problems. We consider different hypotheses of portfolio selection with stable distributed returns for each of them. In particular, we study the optimal allocation between a riskless return and risky stable distributed returns. Furthermore, we examine

Uncertainty. Given the utility hypothesis, the approach to an asset allocation problem is straightforward. An agent purchases a portfolio, C, of risky assets available for investment. Let the intertemporal change in the asset prices be p, and the rate of return on riskless assets be r. With an initial

We present a life-cycle model for pension funds ' optimal asset allocation, where the agents ' labor income process is calibrated to capture a realistic hump-shaped pattern and the available financial assets include one riskless and two risky assets, with returns potentially correlated

an AR(1) process, while the riskless interest rate is constant. The paper also shows how to obtain continuous-time parameters that are consistent with discrete-time econometric es-timates. The continuous-time solution is the limit of that of Campbell and Viceira and has the property that conservative