Download or read book Optimal Consumption and Portfolio Choices with Transaction Cost written by Robindra Nath Mukherjee and published by . This book was released on 1972 with total page 388 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods written by Sanford J. Grossman and published by . This book was released on 2012 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze a model of optimal consumption and portfolio selection in which consumption services are generated by holding a durable good. The durable good is illiquid in that a transaction cost must be paid when the good is sold. It is shown that optimal consumption is not a smooth function of wealth; it is optimal for the consumer to wait until a large change in wealth occurs before adjusting his consumption. As a consequence, the consumption based capital asset pricing model fails to hold. Nevertheless, it is shown that the standard, one factor, market portfolio based capital asset pricing model does hold in this environment. It is shown that the optimal durable level is characterized by three numbers (not random variables), say x, y, and z (where x lt; y lt; z). The consumer views the ratio of consumption to wealth (c/W) as his state variable. If this ratio is between x and z, then he does not sell the durable. If c/W is less than x or greater than z, then he sells his durable and buys a new durable of size S so that S/W = y. Thus y is his quot;targetquot; level of c/W. If the stock market moves up enough so that c/W falls below x, then he sells his small durable to buy a larger durable. However, there will be many changes in the value of his wealth for which c/W stays between x and z, and thus consumption does not change. Numerical simulations show that small transactions costs can make consumption changes occur very infrequently. Further, the effect of transactions costs on the demand for risky assets is substantial.
Download or read book Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods written by Sanford J. Grossman and published by . This book was released on 1987 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze a model of optimal consumption and portfolio selection in which consumption services are generated by holding a durable good. The durable good is illiquid in that a transaction cost must be paid when the good is sold. It is shown that optimal consumption is not a smooth function of wealth; it is optimal for the consumer to wait until a large change in wealth occurs before adjusting his consumption. As a consequence, the consumption based capital asset pricing model fails to hold. Nevertheless, it is shown that the standard, one factor, market portfolio based capital asset pricing model does hold in this environment. It is shown that the optimal durable level is characterized by three numbers (not random variables), say x, y, and z (where x
Download or read book Intertemporal Consumption Choices Transaction Costs and Limited Participation to Financial Markets written by Orazio P. Attanasio and published by . This book was released on 2007 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper builds a unifying framework that, within the theory of intertemporal consumption choices, brings together the limited participation -based explanation of the poor empirical performance of the C-CAPM and the transaction costs-based explanation of incomplete portfolios. Using the implications of the consumption model and observed household consumption and portfolio choices, we identify the preference parameters of interest and a lower bound for the costs rationalizing non-participation in financial markets, in the presence of unobserved heterogeneity in tastes for consumption and portfolio allocation. Using the US Consumer Expenditure Survey and assuming isoelastic preferences, we estimate the coefficient of relative risk aversion at 1.7 and a cost bound of 0.4 percent of non-durable consumption. Our estimate of the preference parameter is theoretically plausible and the bound sufficiently small to be likely to be exceeded by the actual total (observable and unobservable) costs of participating to financial markets.
Download or read book Portfolio Choice Problems written by Nicolas Chapados and published by Springer Science & Business Media. This book was released on 2011-07-12 with total page 107 pages. Available in PDF, EPUB and Kindle. Book excerpt: This brief offers a broad, yet concise, coverage of portfolio choice, containing both application-oriented and academic results, along with abundant pointers to the literature for further study. It cuts through many strands of the subject, presenting not only the classical results from financial economics but also approaches originating from information theory, machine learning and operations research. This compact treatment of the topic will be valuable to students entering the field, as well as practitioners looking for a broad coverage of the topic.
Download or read book Strategic Asset Allocation written by John Y. Campbell and published by OUP Oxford. This book was released on 2002-01-03 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Download or read book Limited Financial Market Participation written by Monica Paiella and published by . This book was released on 2001 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book An Exact Solution to the Portfolio Choice Problem Under Transactions Costs written by Bernard Dumas and published by . This book was released on 1989 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Investors and Markets written by William F. Sharpe and published by Princeton University Press. This book was released on 2011-01-01 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Investors and Markets, Nobel Prize-winning financial economist William Sharpe shows that investment professionals cannot make good portfolio choices unless they understand the determinants of asset prices. But until now asset-price analysis has largely been inaccessible to everyone except PhDs in financial economics. In this book, Sharpe changes that by setting out his state-of-the-art approach to asset pricing in a nonmathematical form that will be comprehensible to a broad range of investment professionals, including investment advisors, money managers, and financial analysts. Bridging the gap between the best financial theory and investment practice, Investors and Markets will help investment professionals make better portfolio choices by being smarter about asset prices. Based on Sharpe's Princeton Lectures in Finance, Investors and Markets presents a method of analyzing asset prices that accounts for the real behavior of investors. Sharpe makes this technique accessible through a new, one-of-a-kind computer program (available for free on his Web site, at http://www.stanford.edu/~wfsharpe/apsim/index.html) that enables users to create virtual markets, setting the starting conditions and then allowing trading until equilibrium is reached and trading stops. Program users can then analyze the final portfolios and asset prices, see expected returns, and measure risk. In addition to popularizing the most sophisticated form of asset-price analysis, Investors and Markets summarizes much of Sharpe's most important previous work and reflects a lifetime of thinking about investing by one of the leading minds in financial economics. Any serious investment professional will benefit from Sharpe's unique insights.
Download or read book Mathematical Modelling and Numerical Methods in Finance written by Alain Bensoussan and published by Elsevier. This book was released on 2009-06-16 with total page 743 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mathematical finance is a prolific scientific domain in which there exists a particular characteristic of developing both advanced theories and practical techniques simultaneously. Mathematical Modelling and Numerical Methods in Finance addresses the three most important aspects in the field: mathematical models, computational methods, and applications, and provides a solid overview of major new ideas and results in the three domains. - Coverage of all aspects of quantitative finance including models, computational methods and applications - Provides an overview of new ideas and results - Contributors are leaders of the field
Download or read book Liquidation Shocks and Transaction Costs written by Bong-Gyu Jang and published by . This book was released on 2015 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates an Epstein-Zin type investors' optimal consumption and portfolio choice problem in the presence of transaction costs and liquidation shocks. We model the liquidation shocks as a Poisson process, which enforces the representative investors to liquidate their wealth in an illiquid asset. We calculate an average liquidity premium to transaction cost ratio with the steady state distribution and show that the liquidation shocks can significantly amplify the effect of the transaction costs on the excess rate of return of the illiquid asset. Our further numerical analysis also demonstrates how the level of elasticity of intertemporal substitution, as well as relative risk aversion, affects the investors' optimal trading behavior.
Download or read book Transactions Costs and Trading Uncertainty written by Christopher Dixon Piros and published by . This book was released on 1983 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Optimal Consumption and Portfolio Choice with Ambiguity written by Qian Lin and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider optimal consumption and portfolio choice in the presence of Knightian uncertainty in continuous-time. We embed the problem into the new framework of stochastic calculus for such settings, dealing in particular with the issue of non-equivalent multiple priors. We solve the problem completely by identifying the worst-case measure. Our setup also allows to consider interest rate uncertainty; we show that under some robust parameter constellations, the investor optimally puts all his wealth into the asset market, and does not save or borrow at all.
Download or read book Essays in Optimal Consumption and Portfolio Choice written by Jialun Li and published by . This book was released on 2012 with total page 114 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Optimal Consumption and Portfolio Choice with Borrowing Constraints written by Jean-Luc Vila and published by . This book was released on 1991 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Markets with Transaction Costs written by Yuri Kabanov and published by Springer Science & Business Media. This book was released on 2009-12-04 with total page 306 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book is the first monograph on this highly important subject.
Download or read book Handbook of the Fundamentals of Financial Decision Making written by Leonard C. MacLean and published by World Scientific. This book was released on 2013 with total page 941 pages. Available in PDF, EPUB and Kindle. Book excerpt: This handbook in two parts covers key topics of the theory of financial decision making. Some of the papers discuss real applications or case studies as well. There are a number of new papers that have never been published before especially in Part II.Part I is concerned with Decision Making Under Uncertainty. This includes subsections on Arbitrage, Utility Theory, Risk Aversion and Static Portfolio Theory, and Stochastic Dominance. Part II is concerned with Dynamic Modeling that is the transition for static decision making to multiperiod decision making. The analysis starts with Risk Measures and then discusses Dynamic Portfolio Theory, Tactical Asset Allocation and Asset-Liability Management Using Utility and Goal Based Consumption-Investment Decision Models.A comprehensive set of problems both computational and review and mind expanding with many unsolved problems are in an accompanying problems book. The handbook plus the book of problems form a very strong set of materials for PhD and Masters courses both as the main or as supplementary text in finance theory, financial decision making and portfolio theory. For researchers, it is a valuable resource being an up to date treatment of topics in the classic books on these topics by Johnathan Ingersoll in 1988, and William Ziemba and Raymond Vickson in 1975 (updated 2 nd edition published in 2006).
