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Stock Market Mean Reversion and Portfolio Choice over the Life Cycle

Michaelides, Alexander G. - 2015

We solve for optimal consumption and portfolio choice in a life-cycle model with short-sales and borrowing constraints …

Persistent link: https://www.econbiz.de/10013017504

Stock Market Mean Reversion and Portfolio Choice over the Life Cycle

Michaelides, Alexander G. - 2015

We solve for optimal consumption and portfolio choice in a life-cycle model with short-sales and borrowing constraints …

Persistent link: https://www.econbiz.de/10013028260

When Prospect Theory Preference Meets Mean-Reverting Asset Returns : A Dynamic Asset Allocation Model

Gao, Jianjun - 2019

prospect-theory preferences. Particular attention is paid to the trading incentives created by the interaction between prospect-theory … results demonstrate that the combination of prospect theory and mean reversion can generate the disposition effect close to … seriously misleading if the prospect theory allocation framework ignores time-variation in expected returns such as mean …

Persistent link: https://www.econbiz.de/10012899580

On the Profitability of Optimal Mean Reversion Trading Strategies

Huang, Peng - 2016

We study the profitability of optimal mean reversion trading strategies in the US equity market. Different from regular pair trading practice, we apply maximum likelihood method to construct the optimal static pairs trading portfolio that best fits the Ornstein-Uhlenbeck process, and rigorously...

Persistent link: https://www.econbiz.de/10013000875

Optimal Risk-Averse Timing of an Asset Sale : Trending vs Mean-Reverting Price Dynamics

Leung, Tim - 2019

This paper studies the optimal risk-averse timing to sell a risky asset. The investor's risk preference is described by the exponential, power, or log utility. Two stochastic models are considered for the asset price – the geometric Brownian motion and exponential Ornstein-Uhlenbeck models –...

Persistent link: https://www.econbiz.de/10012903295

Mean-Reverting Portfolio with Budget Constraint

Zhao, Ziping - 2018

This paper considers the mean-reverting portfolio (MRP) design problem arising from statistical arbitrage (a.k.a. pairs trading) in the financial markets. It aims at designing a portfolio of underlying assets by optimizing the mean reversion strength of the portfolio, while taking into...

Persistent link: https://www.econbiz.de/10012922472

Optimal Mean Reversion Trading with Transaction Costs and Stop-Loss Exit

Leung, Tim - 2015

Motivated by the industry practice of pairs trading, we study the optimal timing strategies for trading a mean-reverting price spread. An optimal double stopping problem is formulated to analyze the timing to start and subsequently liquidate the position subject to transaction costs. Modeling...

Persistent link: https://www.econbiz.de/10013035930

A portfolio choice model with utility from anticipation of future consumption and stock markets' mean reversion

Kandel, Shmuel; Kuznitz, Arik - 2004

Persistent link: https://www.econbiz.de/10002452267

A portfolio choice model with utility from anticipation of future consumption and stock market mean reversion

Kuznitz, Arik; Kandel, Shmuel; Fos, Vyacheslav - In: European economic review : EER 52 (2008) 8, pp. 1338-1352

Persistent link: https://www.econbiz.de/10003804462

Modeling momentum and reversals

Stein, Harvey J.; Pozharny, Jacob - In: Risks : open access journal 10 (2022) 10, pp. 1-10

Stock prices are well known to exhibit behaviors that are difficult to model mathematically. Individual stocks are observed to exhibit short term price reversals and long term momentum, while their industries only exhibit momentum. Here we show that individual stocks can be modeled by simple...

Persistent link: https://www.econbiz.de/10013555665