Showing 1 - 10 of 498
The present Paper investigates the effects of incorporating illiquidity in a standard dynamic portfolio choice problem. Lack of liquidity means that an asset cannot be immediately traded at any point in time. We find the portfolio share of financial wealth invested in illiquid assets given the...
Persistent link: https://www.econbiz.de/10005498092
a similar spending increase, in the spirit of Prospect Theory's loss aversion. This paper posits a model of utility of …
Persistent link: https://www.econbiz.de/10011083950
Alternative assets, such as private equity, hedge funds, and real assets, are illiquid and opaque, and thus pose a challenge to traditional models of asset allocation. In this paper, we study asset allocation and asset pricing in a general-equilibrium model with liquid assets and an alternative...
Persistent link: https://www.econbiz.de/10011184079
This paper derives in closed form the optimal dynamic portfolio policy when trading is costly and security returns are predictable by signals with different mean-reversion speeds. The optimal updated portfolio is a linear combination of the existing portfolio, the optimal portfolio absent...
Persistent link: https://www.econbiz.de/10004964419
This Paper revisits the puzzle of low returns on Swiss franc assets using a new dataset of international portfolio holdings at Swiss banks. The main findings are as follows. First, we find that the return anomaly is present only for fixed income assets and not for equity. Second, it is mostly...
Persistent link: https://www.econbiz.de/10005656129
In this Paper we evaluate (return based) style analysis. The portfolio and positivity constraints imposed by style analysis are useful in constructing mimicking factor portfolios without short positions. We use a simple simulation experiment to show that imposing these constraints in estimating...
Persistent link: https://www.econbiz.de/10005791320
This Paper introduces a tractable, structural model of subjective beliefs. Forward-looking agents care about expected future utility flows, and hence have higher current felicity if they believe that better outcomes are more likely. On the other hand, biased expectations lead to poorer decisions...
Persistent link: https://www.econbiz.de/10005124341
We develop a model of portfolio choice to nest the views of Keynes - who advocates concentration in a few familiar assets - and Markowitz - who advocates diversification across assets. We rely on the concepts of ambiguity and ambiguity aversion to formalize the idea of an investor’s...
Persistent link: https://www.econbiz.de/10008468537
We quantify the sources of risk in currency returns as a first step toward understanding the returns reported for the carry trade. To do this, we develop and estimate an empirical model of exchange rate dynamics using daily data for four currencies relative to the US dollar: the Australian...
Persistent link: https://www.econbiz.de/10011083487
We propose regression based estimators for beta representations of dynamic asset pricing models with an affine pricing kernel specification. We allow for state variables that are cross sectional pricing factors, forecasting variables for the price of risk, and factors that are both. The...
Persistent link: https://www.econbiz.de/10011186634