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Eric Jondeau
SFI Faculty Member
Professor of Finance
Eric Jondeau is Professor of Finance at the University of Lausanne and has been an SFI Faculty Member since 2006. Prof. Jondeau’s papers have been published in leading academic journals.
Research Interests:
His research interests include financial econometrics, asset and risk management, and pension funds.
Recent Research:
In one of his latest papers, Prof. Jondeau and his coauthor put themselves in the shoes of an institutional investor who wishes to implement a long-term portfolio strategy based on forecasts of financial returns. To better select the underlying assets, the authors compare the performance of two competing macro-finance models: an unrestricted Vector AutoRegression (VAR) model and a fully structural Dynamic Stochastic General Equilibrium (DSGE) model. Using data spanning the period 1955 to 2014, the researchers find that the optimal portfolio should be long in stocks and short in bonds for investors using either the VAR or the DSGE models. Further analysis reveals that, on the one hand, the DSGE model generates sufficient mean reversion for both bond and stock returns, such that the term structure of risks decreases for both asset classes. And that, on the other hand, the VAR model is not able to produce such long-term mean reversion for stocks. Ultimately, the DSGE model provides more accurate and timely forecasts of financial returns and clearly outperforms the VAR model for long-term allocation. The Sharpe ratios obtained using the DSGE model are up to twice as large as those obtained using the VAR model.