Download or read book Portfolio Selection Under Nonconvex Transaction Costs and Capital Gains Taxes written by Jason Benjamin Schattman and published by . This book was released on 2000 with total page 194 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Portfolio Selection with Multiple Assets and Capital Gains Taxes written by Lorenzo Garlappi and published by . This book was released on 2001 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the portfolio choice of an investor who can invest in tow risky assets (in addition to a riskless asset) and who is subject to taxes on realized capital gains. These taxes appear in the portfolio choice problem as a form of time-independent, endogenous transaction costs. Similar to the case of portfolio choice with transaction costs, the optimal strategy of the taxable investor contains a quot;no tradequot; region originating from the excercise of the option to defer capital gains taxes. This may lead an investor to hold a markedly undiversified portfolio, for reasonable parameter values. With multiple risky assets the investor is effectively holding a portfolio of tax-deferral options. The value of these options is considerable, in the range of 5-10% of the wealth of an investor with constant relative risk aversion. Such value is decreasing in the volatility and correlation of the assets and in the risk aversion. If the risky assets can be held only through a mutual fund, the investor incurs a cost due to the loss of flexibility whose magnitude is small when assets re positively correlated but can increase considerably as the correlation decreases.

Download or read book Portfolio Optimization with Transaction Costs and Capital Gain Taxes written by and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Across various sets of parameters, duality gaps between lower and upper bounds are smaller than 3% in most examples. We are able to solve the problem up to the size of 20 risky assets and a 30-year-long horizon.

Download or read book Portfolio Investment with the Exact Tax Basis Via Nonlinear Programming written by Victor DeMiguel and published by . This book was released on 2004 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: Computing the optimal portfolio policy of an investor facing capital gains tax is a challenging problem: because the tax to be paid depends on the price at which the security was purchased (the tax basis), the optimal policy is path dependent and the size of the problem grows exponentially with the number of time periods. A popular approach to address this problem is to approximate the exact tax basis by the weighted average purchase price. Our contribution is threefold. First, we show that the structure of the problem has several attractive features that can be exploited to determine the optimal portfolio policy using the exact tax basis via nonlinear programming. Second, we characterize the optimal portfolio policy in the presence of capital-gains tax when using the exact tax basis. Third, we show that the certainty equivalent loss from using the average tax basis instead of the exact basis is very small: it is typically less than 1% for problems with up to ten periods, and this result is robust to the choice of parameter values and to the presence of transaction costs, dividends, intermediate consumption, labor income, tax reset provision at death, and wash-sale constraints.

Download or read book Optimal Portfolio Selection for the Small Investor Considering Risk and Transaction Costs written by Rainer Baule and published by . This book was released on 2013 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: A direct application of classical portfolio selection theory is problematic for the small investor, since transaction costs in the form of bank and broker fees exist. Particularly minimum fees force the investor to choose a rather small selection of assets. This leads to an optimization problem which juxtaposes the transaction costs against the risk costs arising with portfolios consisting of only a few assets. Despite the non-convex and thus complex optimization, an algorithmic solution turns out to be very fast and precise. An empirical study shows that for smaller investment volumes, transaction costs dominate risk costs, so that optimal portfolios contain only a very small number of assets.

Download or read book Optimal Portfolio Management with Transactions Costs and Capital Gains Taxes written by Hayne E. Leland and published by . This book was released on 1999 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Portfolio Turnover Under Non convex Unit Transaction Costs written by Emrah Silav and published by . This book was released on 2009 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Portfolio Management with Transactioins Costs and Capital Gains Taxes written by Hayne E. Leland and published by . This book was released on 1999 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Portfolio Selection with Fixed Transaction Costs in the Presence of Jumps and Random Drift written by Ajay Subramanian Aiyer and published by . This book was released on 1996 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Financial Optimization written by Hercules Vladimirou and published by . This book was released on 2007 with total page 450 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Economic Computation and Economic Cybernetics Studies and Research written by and published by . This book was released on 2009 with total page 888 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Dissertation Abstracts International written by and published by . This book was released on 2000 with total page 752 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Taxing Portfolio Income in Global Financial Markets written by Doron Herman and published by IBFD. This book was released on 2002 with total page 503 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Portfolio Selection written by Harry Markowitz and published by Yale University Press. This book was released on 2008-10-01 with total page 369 pages. Available in PDF, EPUB and Kindle. Book excerpt: Embracing finance, economics, operations research, and computers, this book applies modern techniques of analysis and computation to find combinations of securities that best meet the needs of private or institutional investors.

Download or read book Optimal Portfolio Selection with Transaction Costs written by Phelim P. Boyle and published by . This book was released on 1994 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Dynamic Portfolio Selection with Transaction Costs microform a Non singular Stochastic Optimal Control Approach written by Thamayanthi Chellathurai and published by National Library of Canada = Bibliothèque nationale du Canada. This book was released on 2003 with total page 390 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Portfolio Selection with Transaction Costs written by N'Golo Koné and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The optimal portfolio selection problem has been and continues to be a subject of interest in finance. The main objective is to find the best way to allocate the financial resources in a set of assets available on the financial market in order to reduce the portfolio fluctuation risks and achieve high returns. Nonetheless, there has been a strong advance in the literature of the optimal allocation of financial resources since the 20th century with the proposal of several strategies for portfolio selection essentially motivated by the pioneering work of Markowitz (1952)which provides a solid basis for portfolio analysis on the financial market. This thesis, divided into three chapters, contributes to this vast literature by proposing various economic tools to improve the process of selecting portfolios on the financial market in order to help stakeholders in this market. The first chapter, a joint paper with Marine Carrasco, addresses a portfolio selection problem with trading costs on stock market. More precisely, we develop a simple GMM-based test procedure to test the significance of trading costs effect in the economy regardless of the form of the transaction cost. In fact, most of the studies in the literature about trading costs effect depend largely on the form of the frictions assumed in the model (Dumas and Luciano (1991), Lynch and Balduzzi (1999), Lynch and Balduzzi (2000), Liu and Loewenstein (2002), Liu (2004), Lesmond et al. (2004), Buss et al. (2011), Gârleanu and Pedersen (2013), Heaton and Lucas (1996)). To overcome this problem, we develop a simple test procedure which allows us to test the significance of trading costs effect on a given asset in the economy without any assumption about the form of these frictions. Our test procedure relies on the assumption that the model estimated by GMM is correctly specified. A common test used to evaluate this assumption is the standard J-test proposed by Hansen (1982). However, when the true parameter is close to the boundary of the parameter space, the standard J-test based on the chi2 critical value suffers from overrejection. To overcome this problem, we propose a two-step procedure to test overidentifying restrictions when the parameter of interest approaches the boundary of the parameter space. In an empirical analysis, we apply our test procedures to the class of anomalies used in Novy-Marx and Velikov (2016). We show that transaction costs have a significant effect on investors' behavior for most anomalies. In that case, investors significantly improve out-of-sample performance by accounting for trading costs. The second chapter addresses a multi-period portfolio selection problem when the number of assets in the financial market is large. Using an exponential utility function, the optimal solution is shown to be a function of the inverse of the covariance matrix of asset returns. Nonetheless, when the number of assets grows, this inverse becomes unreliable, yielding a selected portfolio that is far from the optimal one. We propose two solutions to this problem. First, we penalize the norm of the portfolio weights in the dynamic problem and show that the selected strategy is asymptotically efficient. However, this method partially controls the estimation error in the optimal solution because it ignores the estimation error in the expected return, which may also be important when the number of assets in the financial market increases considerably. We propose an alternative method that consists of penalizing the norm of the difference of successive portfolio weights in the dynamic problem to guarantee that the optimal portfolio composition does not fluctuate widely between periods. We show, under appropriate regularity conditions, that we better control the estimation error in the optimal portfolio with this new procedure. This second method helps investors to avoid high trading costs in the financial market by selecting stable strategies over time. Extensive simulations and empirical results confirm that our procedures considerably improve the performance of the dynamic portfolio. In the third chapter, we use various regularization (or stabilization) techniques borrowed from the literature on inverse problems to estimate the maximum diversification as defined by Choueifaty (2011). In fact, the maximum diversification portfolio depends on the vector of asset volatilities and the inverse of the covariance matrix of assets distribution. In practice, these two quantities need to be replaced by their sample counterparts. This results in estimation error which is amplified by the fact that the sample covariance matrix may be close to a singular matrix in a large financial market, yielding a selected portfolio far from the optimal one with very poor performance. To address this problem, we investigate three regularization techniques, such as the ridge, the spectral cut-off, and the Landweber-Fridman, to stabilize the inverse of the covariance matrix in the investment process. These regularization schemes involve a tuning parameter that needs to be chosen. So, we propose a data-driven method for selecting the tuning parameter in an optimal way. The resulting regularized rules are compared to several strategies such as the most diversified portfolio, the target portfolio, the global minimum variance portfolio, and the naive 1/N strategy in terms of in-sample and out-of-sample Sharpe ratio.