Luis M. Viceira
There are 8 articles for this faculty member.
An Empirical Decomposition of Risk and Liquidity in Nominal and Inflation-Indexed Government Bonds
| Authors: | Carolin E. Pflueger and Luis M. Viceira |
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| Published: | May 27, 2011 |
| Paper Release Date: | March 2011 |
| Feature: | Working Papers |
The yields on US Treasury Inflation Protected Securities (TIPS) have declined dramatically since they were first issued in 1997. This paper asks to what extent the returns on nominal and inflation-indexed bonds in both the US and the UK can be attributed to differential liquidity and market segmentation or to real interest rate risk and inflation risk.
Published in 2010
HBS Faculty Debate Financial Reform Legislation
| Published: | July 21, 2010 |
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| Feature: | Views on News |
Harvard Business School professors Robert Steven Kaplan, David A. Moss, Robert C. Pozen, Clayton S. Rose and Luis M. Viceira share their perspectives on the Dodd-Frank Wall Street Reform and Consumer Protection Act, slated to be signed this week by U.S. President Barack Obama.
Published in 2009
Inflation Bets or Deflation Hedges? The Changing Risks of Nominal Bonds
| Authors: | John Y. Campbell, Adi Sunderam, and Luis M. Viceira |
|---|---|
| Published: | March 12, 2009 |
| Paper Release Date: | January 2009 |
| Feature: | Working Papers |
Are nominal government bonds risky investments that investors must be rewarded to hold? Or are they safe investments, whose price movements are either inconsequential or even beneficial to investors as hedges against other risks? U.S. Treasury bonds have performed well as hedges during the financial crisis of 2008, but the opposite was true in the late 1970's and early 1980's. John Y. Campbell, a Visiting Scholar at HBS, Harvard Ph.D. candidate Adi Sunderam, and HBS professor Luis M. Viceira explore such changes over time in the risks of nominal government bonds.
Published in 2007
Bond Risk, Bond Return Volatility, and the Term Structure of Interest Rates
| Author: | Luis M. Viceira |
|---|---|
| Published: | September 11, 2007 |
| Paper Release Date: | May 2007 |
| Feature: | Working Papers |
This paper documents the existence of considerable variation over time in the covariance or correlation of Treasury bond returns with stock returns and with consumption growth. There are times in which bonds appear to be safe assets, while at other times they appear to be highly risky assets. The paper finds that time variation in bond risk is systematic and positively related to the level and the slope of the yield curve. These are factors that proxy for inflation and general economic uncertainty, inflation risk, and the risk premium on bonds.
The Excess Burden of Government Indecision
| Authors: | Francisco J. Gomes, Laurence J. Kotlikoff, and Luis M. Viceira |
|---|---|
| Published: | September 6, 2007 |
| Paper Release Date: | May 2007 |
| Feature: | Working Papers |
Virtually all U.S. policymakers, budget analysts, and academic experts agree that the United States faces a very serious, if not a grave, long-term fiscal problem. Yet few policymakers will publicly say how or when they would fix it, perhaps because they fear being the bearer of bad news and getting voted out of office. Delaying the resolution of fiscal imbalances incurs two costs, however. First, it leaves a larger bill for a smaller number of people to pay. Second, and of primary interest to this research, it perpetuates uncertainty, leading economic agents to make suboptimal saving, investment, and other decisions, and reducing welfare. This research identifies and measures this "excess burden" of government indecision and finds that it is economically significant.
Global Currency Hedging
| Authors: | John Y. Campbell, Karine Serfaty-de Medeiros, and Luis M. Viceira |
|---|---|
| Published: | September 5, 2007 |
| Paper Release Date: | May 2007, revised January 2009 |
| Feature: | Working Papers |
This article is forthcoming in the Journal of Finance. How much should investors hedge the currency exposure implicit in their international portfolios? Using a long sample of foreign exchange rates, stock returns, and bond returns that spans the period between 1975 and 2005, this paper studies the correlation of currency excess returns with stock returns and bond returns. These correlations suggest the existence of a typology of currencies. First, the euro, the Swiss franc, and a portfolio simultaneously long U.S. dollars and short Canadian dollars are negatively correlated with world equity markets and in this sense are "safe" or "reserve" currencies. Second, the Japanese yen and the British pound appear to be only mildly correlated with global equity markets. Third, the currencies of commodity producing countries such as Australia and Canada are positively correlated with world equity markets. These results suggest that investors can minimize their equity risk by not hedging their exposure to reserve currencies, and by hedging or overhedging their exposure to all other currencies. The paper shows that such a currency hedging policy dominates other popular hedging policies such as no hedging, full hedging, or partial, uniform hedging across all currencies. All currencies are uncorrelated or only mildly correlated with bonds, suggesting that international bond investors should fully hedge their currency exposures.
Published in 2006
Optimal Value and Growth Tilts in Long-Horizon Portfolios
| Authors: | Jakub W. Jurek and Luis M. Viceira |
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| Published: | September 7, 2006 |
| Paper Release Date: | revised July 2006 |
| Feature: | Working Papers |
Long-term investors look for portfolio strategies that optimally trade off risk and reward, not in the immediate future, but over the long term. It is unrealistic to expect long-term investors to adopt an "invest and forget" strategy, but creating a portfolio strategy that adjusts asset allocations in response to changing risk premia, interest rates, and expected inflation remains a challenge in finance. Jurek and Viceira have devised a solution method that aims at a practical implementation of dynamic portfolio choice models with realistically complex investment opportunity sets. They have applied their method to study the role of value stocks and growth stocks in the portfolios of long-term investors, and have found that long-term investors might want to tilt their portfolios away from value stocks despite the fact that the average return on value stocks is larger than the average return on growth stocks (the so-called "value premium"). Their findings provide support for the idea that the superior performance of value stocks might reflect simply that they are riskier than growth stocks at long horizons.
Published in 2004
New Challenges for Long-Term Investors
| Q&A with: | Luis M. Viceira |
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| Published: | August 23, 2004 |
| Feature: | Research & Ideas |
Risk-reward. Rising interest rates. Stocks or bonds. The long-term investor has lots to ponder when setting asset allocation strategy, says HBS professor Luis M. Viceira. And the answers might not come with "conventional wisdom."
