We present a rational learner agent, which considers the information coming from a behavioral counterpart during the allocation process. The learner agent adopts a herding behaviour by conditioning her choice on the selection of the portfolio's constituents. The considered framework has...

Ambiguity and learning about the equity premium can simultaneously explain the low fraction of financial wealth allocated to stocks over the life cycle and the stock market participation puzzle. Individuals are ambiguous about the size of the equity premium and are averse to this ambiguity,...

Feedback trading strategies have gained much popularity among researchers in the last decadesand are used to illustrate how new information based on returns is reflected in the markets. This paper extends previous studies by decomposing the overall return premium and introducing the global...

We construct investor sentiment indices for six major stock markets and decompose them into one global and six local indices. In a validation test, we find that relative sentiment is correlated with the relative prices of dual-listed companies. Global sentiment is a contrarian predictor of...

The momentum effect is a systematic inefficiency in the market that can be exploited by a trading strategy. This conclusion is supported by theoretical and empirical evidence. But the academic research that tries to quantify the performance of this kind of strategy often relies on a methodology...

In this paper we extend the methodology of our earlier work (Papailias and Thomakos, 2011) on a modified moving average technical trading rule by allowing short sales. We show how short sales change the trading rule which now acts as a dynamic trailing "stop-and-reverse", instead of a dynamic...

Black-Litterman model provides a reasonable platform to portfolio optimization and asset allocation by presenting an equilibrium state of the markets and only deviating from that equilibrium state with forward-looking strategic views. Index of Economic Freedom (IEF) can be used as a handy tool...

VaR_Delta-Normal fails in two counts: subadditivity and potentially producing losses larger than its portfolio value. This paper solves the second inconsistency developing formulas derived from a put option, named PVaR_Delta-Normal and Put_Expected_Shortfall, PSF_Delta-Normal; the latter also...