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Portfolio Selection with Parameter and Model Uncertainty: A Multi-Prior Approach
Garlappi, Lorenzo; Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2005
In this paper, we show how an investor can incorporate uncertainty about expected returns when choosing a mean-variance optimal portfolio. In contrast to the Bayesian approach to estimation error, where there is only a single prior and the investor is neutral to uncertainty, we consider the case...
Persistent link: https://www.econbiz.de/10005791415
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Portfolio Selection with Parameter and Model Uncertainty: A Multi-Prior Approach
Garlappi, Lorenzo; Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2005
In this paper, we show how an investor can incorporate uncertainty about expected returns when choosing a mean-variance optimal portfolio. In contrast to the Bayesian approach to estimation error, where there is only a single prior and the investor is neutral to uncertainty, we consider the case...
Persistent link: https://www.econbiz.de/10005124485
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Model Misspecification and Under-Diversification
Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2002
asset returns. Our contribution is to develop a framework that allows for ambiguity about the joint distribution of returns … for all stocks being considered for the portfolio, and also for different levels of ambiguity for the marginal … international equity returns. The calibration shows that when the overall ambiguity about the joint distribution of returns is high …
Persistent link: https://www.econbiz.de/10005504745
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Keynes Meets Markowitz: The Trade-off Between Familiarity and Diversification
Boyle, Phelim; Garlappi, Lorenzo; Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2010
assets - and Markowitz - who advocates diversification across assets. We rely on the concepts of ambiguity and ambiguity … degree of ambiguity across assets, and (ii) the standard deviation of the estimate of expected return on each asset. If the … standard deviation of the expected return estimate and the difference between the ambiguity about familiar and unfamiliar …
Persistent link: https://www.econbiz.de/10008468537
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Market and Technical Risk in R&D
Gerlach, Heiko A.; Rønde, Thomas; Stahl, Konrad - C.E.P.R. Discussion Papers - 2002
We endogenize the market risk (at given technical risk) in firms’ R&D decisions by introducing stochastic R&D in the Hotelling model. It is shown that if the technical risk is sufficiently high, the market risk remains low even if firms pursue similar projects. This leads firms to focus on the...
Persistent link: https://www.econbiz.de/10005504272
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Biases of Professional Exchange Rate Forecasts: Psychological Explanations and an Experimentally-Based Comparison to Novices
Bofinger, Peter; Leitner, Johannes; Schmidt, Robert - C.E.P.R. Discussion Papers - 2004
The empirical performance of macroeconomic exchange rate models is more than disappointing. This dismal result is also reflected in the forecasting capabilities of professional analysts: all in all, analysts are not in a position to beat naïve random walk forecasts. The root for this deficient...
Persistent link: https://www.econbiz.de/10005504428
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Mortality Risks, Education and Child Labour
Baland, Jean-Marie; Estevan, Fernanda - C.E.P.R. Discussion Papers - 2006
In this paper, we investigate the role of young adult mortality on child labour and educational decisions. We argue that mortality risks are a major source of risks in returns to education in developing countries. We show that, in the absence of appropriate insurance mechanisms, the level of...
Persistent link: https://www.econbiz.de/10005498071
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Auctions with Anticipated Emotions: Overbidding, Underbidding, and Optimal Reserve Prices
Roider, Andreas; Schmitz, Patrick W - C.E.P.R. Discussion Papers - 2007
The experimental literature has documented that there is overbidding in second-price auctions, regardless of bidders' valuations. In contrast, in first-price auctions there tends to be overbidding for large valuations, but underbidding for small valuations. We show that the experimental evidence...
Persistent link: https://www.econbiz.de/10005498113
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Party Governance and Political Competition with an Application to the American Direct Primacy
Castanheira, Micael; Crutzen, Benoît SY; Sahuguet, Nicolas - C.E.P.R. Discussion Papers - 2005
We analyse how the governance structure of political parties influences electoral competition. Parties choose their organization to manipulate the incentives of politicians to provide effort. We show that intra- and inter-party competition interact to shape these incentives. We also get new...
Persistent link: https://www.econbiz.de/10005498196
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Uncertainty in Spatial Duopoly with Possibly Asymmetric Distributions: a State Space Approach
Meagher, Kieron J.; Zauner, Klaus G. - Research School of Economics, College of Business and … - 2008
In spatial competition firms are likely to be uncertain about consumer locations when launching products either because of shifting demograph- ics or of asymmetric information about preferences. Realistically distri- butions of consumer locations should be allowed to vary over states and need...
Persistent link: https://www.econbiz.de/10004971401