Our objective is to investigate the effect of model misspecification on mean-variance portfolios and to show how asset-pricing theory and asymptotic analysis (for large number of assets) can be used to provide powerful solutions to mitigate misspecification. The starting point of our analysis is...

In this paper, we study the effect of proportional transaction costs on consumption-portfolio decisions and asset prices in a dynamic general equilibrium economy with a financial market that has a single-period bond and two risky stocks, one of which incurs the transaction cost. Our model has...

In this paper, we study the effect of proportional transaction costs on consumption-portfolio decisions and asset prices in a dynamic general equilibrium economy with a financial market that has a single-period bond and two risky stocks, one of which incurs the transaction cost. Our model has...