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We propose a simple approach to dynamic multi-period portfolio choice with transaction costs that is tractable in settings with a large number of securities, realistic return dynamics with multiple risk factors, many predictor variables, and stochastic volatility. We obtain a closed-form...
Persistent link: https://www.econbiz.de/10013020994
The composition of natural liquidity has been changing over time. An analysis of intraday volumes for the S&P500 constituent stocks illustrates that (i) volume surprises, i.e., deviations from their respective forecasts, are correlated across stocks, and (ii) this correlation increases during...
Persistent link: https://www.econbiz.de/10012908051
Persistent link: https://www.econbiz.de/10011743945
We consider a broad class of dynamic portfolio optimization problems that allow for complex models of return predictability, transaction costs, trading constraints, and risk considerations. Determining an optimal policy in this general setting is almost always intractable. We propose a class of...
Persistent link: https://www.econbiz.de/10013037159
Persistent link: https://www.econbiz.de/10013365796
We consider a liquidation problem in which a risk-averse trader tries to liquidate a fixed quantity of an asset in the presence of market impact and random price fluctuations. When deciding the liquidation strategy, the trader encounters a trade-off between the transaction costs incurred due to...
Persistent link: https://www.econbiz.de/10014349005