This paper contributes to the dynamic portfolio choice and transaction cost literatures by considering a multiperiod CRRA individual who faces transaction costs and who has access to multiple risky assets, all with predictable returns.(...)

The seminal work of Constantinides (1986) documents how, when the risky return is calibrated to the U.S. market return, the impact of transaction costs on per-annum liquidity premia is an order of magnitude smaller than the cost rate itself. A number of recent papers have formed portfolios...