Showing 1 - 10 of 189
In this article, we wish to understand: (i) the valuation of a non-redundant derivative in an economy where agents are heterogenous, (ii) the role of such a derivative in an investor's dynamic portfolio strategy, and (iii) the effect of introducing this derivative on the prices of more primitive...
Persistent link: https://www.econbiz.de/10012741367
In this article, we examine analytically the optimal consumption and portfolio policies in an economy with incomplete financial markets where agents have power utility over intermediate consumption and bequest, and face portfolio constraints and a stochastic investment opportunity set. The...
Persistent link: https://www.econbiz.de/10012741933
In this article, we show how to analyze analytically the equilibrium policies and prices in an economy with a stochastic investment opportunity set and incomplete financial markets, when agents have power utility over both intermediate consumption and terminal wealth, and face portfolio...
Persistent link: https://www.econbiz.de/10012763095
We develop a model for an investor with multiple priors and aversion to ambiguity. We characterize the multiple priors by a quot;confidence intervalquot; around the estimated expected returns and we model ambiguity aversion via a minimization over the priors. Our model has several attractive...
Persistent link: https://www.econbiz.de/10012717043
We study the effect of introducing a non-redundant derivative on the volatilities of the stock-market return and the locally risk-free interest rate. Our analysis uses a standard, frictionless, full-information, dynamic, continuous-time, general-equilibrium, Lucas endowment economy in which...
Persistent link: https://www.econbiz.de/10012734056
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 investor's...
Persistent link: https://www.econbiz.de/10012718491
We develop a model of portfolio choice capable of nesting the views of Keynes, advocating concentration in a few familiar assets, and Markowitz, advocating diversification across all available assets. In the model, the return distributions of risky assets are ambiguous, and investors are averse...
Persistent link: https://www.econbiz.de/10012719162
In this paper, we extend the mean-variance portfolio model where expected returns are obtained using maximum likelihood estimation to explicitly account for uncertainty about the estimated expected returns. In contrast to the Bayesian approach to estimation error, where there is only a single...
Persistent link: https://www.econbiz.de/10012721834
Returns on international equities are characterized by jumps; moreover, these jumps tend to occur at the same time across countries leading to systemic risk. In this paper, we evaluate whether systemic risk reduces substantially the gains from international diversification. First, in order to...
Persistent link: https://www.econbiz.de/10012722048
In this paper we develop a model of intertemporal portfolio choice where an investor accounts explicitly for the possibility of model misspecification. This work is motivated by the difficulty in estimating precisely the probability law for asset returns. Our contribution is to develop a...
Persistent link: https://www.econbiz.de/10012722126